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Brian: Hey, guys. Happy Tuesday. I am Brian Davis. I’m one of the co-founders of SparkRental.com and I’m super excited. I’m here today with Adrian Smude, who is an expert on mobile home investing combined with land investing. So, Adrian, welcome.
Adrian: Thank you, Brian. I appreciate you having me today.
Brian: Absolutely. So, Deni’s not with us today. She’s on vacation. She’s traveling. You know, last week we talked about how to buy properties with credit cards. And this week we’re kind of continuing the trend because a lot of these deals are actually affordable enough that you could potentially buy them with credit cards. So, you know, without further ado, Adrian, let’s jump in and just do a quick overview of what your real estate investing strategy looks like.
Adrian: My strategy is buying the mobile home with the dirt. A lot of people get confused. They think of the big parks where you own a massive amount of land and lots of properties. We don’t do that. And other people think of it as just the home. So, the home within the park and we’re renting the land space. I have done a little bit of that, but that’s not the main business. The main business is a single unit with the dirt. And it’s also more in rural areas is where we tend to go. But there are in the cities as well. It’s a forgotten little niche, but I didn’t think it was forgotten. But everyone seems to have a hard time understanding what I talk about, so I have to always overexplain it. And that’s why I realized it is kind of a forgotten niche.
Brian: Yeah, because, you know, we did a webinar a couple of months back with someone about buying mobile home parks, and we’ve brought on investors on this show who invest in mobile homes that they move around, you know, the physical home itself, but not attached to any land. So, you buy land that has a mobile home sitting on it quasi permanently. Is that right?
Adrian: Yes, sir. So, most of ours are not mobile, even though they’re called mobile homes, they’re either too old to physically move or too expensive to move.
Brian: Are they on a real foundation or are they still on wheels or what?
Adrian: Both. How about? So, it depends on the age and what the owner has done to them. I don’t care which one it is, as long as it’s actually strapped down the right way and it’s safe and a hurricane is not going to go and blow over the wobbly blocks, I don’t really care what the foundation is.
Brian: All right. And you typically buy a fixer-upper, is that right?
Adrian: Yes. Our specialty is buying the handyman special and kind of keeping it that way. We turn it into a safe, livable home. But personally, I like them to be a little ugly because I have found my Avatar resident that’s going to live there. Happens to be a blue-collar handyman, handywoman, and those people like to go and paint, do the carpet and do some work themselves. Even though they’re just renting it, they like doing it. I found they stay a little bit longer when they do that, so it’s kind of a win-win there.
Brian: Yeah, that makes sense. And do these people sign contracts with you to as a lease-purchase to buy the property and or yeah to eventually buy the property, even though they’re leasing it from you in the beginning.
Adrian: I’ve done a little bit of that. It’s not the main business. I honestly let the property tell me if I’m going to do that or not. But if it’s a property that’s going to have a lot of maintenance or maybe one, I just don’t want to own long term. But it’s serving its purpose right now and it’s making me some money. Then I’ll be more likely to do a lease option, lease purchase. In general, I don’t. And even if I have it just as a long-term rental, we still do the same rehab to it. We’re looking for people that are going to stay a really, really long time and I feel like if they put a little bit of work to make it pretty in their home, even though they are renting it, they will stay a very long time because they have some actual sweat equity in it and they’re not as willing to mess up their own home that they did the carpets, you know, now it’s their carpets.
Brian: Right? Yeah, I know. That makes sense. You know, I’ve found that it’s hard to motivate renters to put in some of that sweat equity because they don’t own the home and because their lease could be non-renewed next year, or the rent could be increased feasibly for them. So, do you sign longer-term leases like I mean, how do you incentivize people to put some of that sweat equity into your mobile homes?
Adrian: Great question. Not many people follow up with that question, which is a really important question. We do a few things and to keep it as short as possible because it’s a long topic. We give them benefits for staying longer. So, we actually cap the amount that we are able to raise the rent. We cannot raise it more than 10%. So historically that’s been fine. Recently, that hasn’t been as good on our side. But I still think it’s we’re winning because we have people that are staying a very long time. Now they’re really getting that benefit and they’re willing to stay because it’s their home and we give them other benefits if we decide to sell the home. They get the first rights to buy it.
Brian: Okay.
Adrian: And to me, why wouldn’t I want to sell it to them? They already live there. They already know it. You know, it’s not a discounted rate. They just get the first rights to buy it at the market value. And in today’s market, where we see landlords selling all the time. And that’s a big benefit that they get and they’re liking.
Brian: Yeah. Provide some security and safety for them. That’s great. So let me ask you this. Let’s walk through some typical numbers for deals that you do. So, can you talk us through like a typical purchase price for one of these deals you do? Typical rehab costs, the typical rent, and the returns and the monthly cash flow that you’re seeing on one of these average deals of yours.
Adrian: So, let’s keep in mind first what I said. I do a handyman special, so I maybe don’t do the full granite and the full finished signed-up project. A few years ago, I was buying a lot older properties. We’re talking like sixties and seventies, the ages, the ones that most people are really scared of even the mobile home investors.
Brian: Have mobile homes. So, I mean, that’s ancient for mobile homes.
Adrian: Yeah. Well, after this, I’ll tell you the story of the newest one I ever bought, which is a 97, which a lot of people still think is crazy how old that is. But that’s new in my world. But so, the sixties and seventies, I don’t put a lot into them. The structure is not as strong. They are cheaper to rehab because you have cheaper materials. But the flip side is you can completely rehab it and put two-by-fours in their drywall. You can pick which direction you want to go, spend a little bit more money. And one of the nicest ones I have is a 1969. I mean, it’s got a brand-new kitchen. It’s beautiful that was already there. And then some of the nastiest I’ve ever been. And I’ve actually been in the 2000s because the people just let it get destroyed. What are the typical numbers? I’m going to date it a little bit back in 2019 when I bought a lot more of those older ones. So just add a little bit of appreciation on there. I would be all in around 30,000, 35,000 dollars now. I am in central Florida in between Tampa, Orlando. So, the more rural areas, that’d be my purchase price, a light rehab to keep it safe and then my closing cost.
Brian: That was 30, 35 that including the purchase price, the closing costs and the rehab costs.
Adrian: Everything. And I’d be renting those for 700 a month. I mean, yeah, good numbers. You don’t have to put that in a calculator to realize that’s good enough.
Brian: Yeah, yeah. No, that’s great.
Adrian: That was also really close to the dirt value. Now, I honestly cannot find those today, but I can still find really good numbers with those older ones. I have chosen to not buy as many of those because now I’m quote-unquote upgrading my portfolio. I’m looking for a little bit stronger bones because I’ve upgraded like maybe the 97, but that one is still phenomenal deal. I mean, we bought that a month ago, for $101,000. I don’t know what type of rehab I’m going to have because there is a tenant in there. He’s paying $800 a month, which is very low. It’s on an acre of land. It’s a 97. It’s in good condition. Honestly, if I. If he doesn’t do anything wrong to the property, I’m not going to have to put very little in it, very much in it at all. But he’s been there a long time. We’re raising the rent to 1800 dollars. That’s what I feel is fair market. And the reason I’m doing is a steep, straight-up increase is he didn’t want to play well on the phone. He didn’t want to have a conversation. So now I have to send we already sent a letter saying, hey, it’s going up to that. We were going to try to step it up. But I mean, that’s still a really good number. I mean, I’m super happy with where those numbers and we bought to within the last few months very similar numbers and it still has a newer roof, newer AC, it’s a stronger property and I have land with it. Those I bet been buying in the sixties and seventies. I mean, I’m buying a tiny sliver of land. Down a dirt road where the land’s never going to appreciate. Part of the long-term game is, I’ll say, land banking. I always buy straight for cash flow, but there’s always and I call it my lotto ticket that the land might be worth something.
Brian: They might.
Adrian: Take persuasion. Yeah.
Brian: So, do you pay for these deals in cash? Do you take out loans? How do you fund these deals?
Adrian: So, the big banks, don’t like them. So, I would pretty much say you’re not going to deal with those. You can use some smaller community banks. So, think of the ones that have three or four or five branches and then credit unions. I’ve had many of those tell me they do fund these. I don’t use the banks though, so we use mainly owner financing. I have found that owner financing is not as difficult as it was whenever I was in a single-family world because people used to just tell me, well, why don’t you go to a bank? Well, I don’t get that excuse now because most people understand that mobile homes cannot be financed or are very difficult. Right. And a lot of the people that live in them, they bought on owner financing. So, it’s just not this brand-new topic to them. And the second way besides cash we can obviously use is private money. Private money, because I mentioned some of these numbers. You can tell there are good returns. I’m able to if I need to pay out a higher amount to a private moneylender because. I have a lot of spread in there. Now, I don’t have to as much as I’ve proven myself, but at the beginning, I mean, I was paying I think I had paid some people 15, 16%. And that wasn’t hard money. That was an actual five-year term, which sounds crazy. But I was still making phenomenal return myself because I was making so much and now, I’ve proven myself. Those guys gave me that chance. They were they knew I was new to it, but they still gave that chance. And now they’re still reaping some phenomenal returns.
Brian: So, as a percentage, I mean, what kind of returns are you earning on a typical deal? Including all expenses.
Adrian: It is hard because. So that new one that I just got, it’s going to be 1800 a month. My payment on that is 525. And I suspect the typical numbers are really what I run. I don’t have I want to wait until I have 10, 15 years of data with them to be able to give the real answer. But I’ve been tracking the typical 40% goes to your taxes, insurance and your repairs. You know, one benefit on those older ones is our property taxes are really low. Because the county is misspelled. Don’t think they’re worth anything. I mean, I have tax bills that are a few hundred dollars a year, like two or 300. And I know people paying that a month.
Brian: Yeah. So, you know, in the single-family rental world, you know, people talk about the 50% rule. You can generally, you know, it’s just a basic rule of thumb that generally you can expect to pay around 50% of the rent to nonmortgage expenses. So, I heard you said just now that you typically pay out around 40% of the rent and nonmortgage expenses, is that right?
Adrian: Yeah, that’s what I’m tracking, you know, come back and ask me in another five years. I don’t like getting data that’s not really long-term because I don’t think that it’s accurate enough. You know, we haven’t replaced the roof on the percentage we will and within a 15-year span. But right now, we are tracking that. And part of the reason I’m a little bit lower is I do have that handyman handywoman, and we a lot of our system incentivizes them not to call me for a toilet flapper, not to call me for all these small things. And it doesn’t mean that they ignore it. They actually take care of it, and they take care of it the right way. So, people that have come into our system the way that we built it, that’s how they are now. We have some people that we inherited and honestly it helps prove my system even better because they are the biggest headaches right now. They call us for all these small things. And yeah, I think that’s one of the big ways we’re able to keep our numbers a little bit lower and we’re buying in areas that those people want to live in. That’s another big piece that one of my mentors, Lenny, got through my head. When you buy your property, you buy your tenant. So, you buy a good area or going to have good homes, you’re going to probably get a good tenant. And then the reverse we buy where people want to live, even though a lot of people probably listening have that trailer trash stigma. But that can be true in some areas, and you can have a saying quote-unquote trash and a single-family home, an apartment complex, any type of home. It’s not the structure, it’s the location.
Brian: Yeah. You know, Deni and I talk all the time about how the quality of your renters determines the quality of your returns. You know.
Adrian: You love it. Yeah, that’s a good quote. I love that.
Brian: Right. Well, thanks. I’ll take credit for it. So, Brian Lebow here says, can this strategy be done in California? And if so, how and where? So, what are your thoughts for Brian?
Adrian: I invest only locally, but honestly, I know people doing mobile homes, investing in California, in parks. Like I mentioned, I don’t do so much of and out of parks. You know you got to add the zeros that we always joke around about in California. Of course, I know people are doing it, so I know it’s possible. I would definitely look a little more in the rural areas. You are going to have a little bit different regulation out there. I know that. So here we deal with the DMV. Even if it’s real property, the title company still goes through the DMV to get the title transferred over. And they have a different department in California that California realized they didn’t have enough arms in the government. So, they created a whole another one just for mobile homes. And I don’t know what it’s called, but it can be done. I know people literally actively right now investing in mobile homes with its own land and without buying and flipping them or buying them and renting them or buying them and selling them on payments. So, all the strategies do work out there. All right.
Brian: By the way, Tim Dooley says greetings from Bremerton, Washington. And he also enjoys that quote. But the quality of your renters determines the quality of your returns. Thank you, Tim. Tim is a regular around here. We love Tim. So, Adrian, you mentioned here some of the legal aspects of this. You actually have to go through the DMV for these mobile home deals. How are these properties zoned? Do you need permits for the renovations? You know this is a different type of investing for a lot of us who are more accustomed to single-family rentals and single-family flips. So, yeah, what are some of the legal headaches or red tape in these kinds of deals, or is it way less? I mean.
Adrian: It’s if you’re buying just the home and land together, it is less than you think. There’s not a lot. You just have different zoning. You know, every municipality going a little different, but it would just be zoned is able to have a mobile home on there. So, it could be zoned for just one house per acre. The same idea. It could be one house or one mobile home per acre. You just have to look that up. Now, if you are going to be getting into the world of moving them, there is a lot more red tape. Because you’d have to get a permit from the county. And if you’re moving in between counties now, you may be dealing with two different counties you have to get permits with. I stay away from that because honestly, it sounds like work. I don’t like to set myself up with a lot of work. I’m not good at all the red tape stuff, so I try to stay as simple as possible. The same is going to be true with pulling permits. There are a few counties around me that don’t require as many permits as a single-family, but just go ahead and count on that you need to do the exact same as a single-family site built. And if you get surprised and you’re lucky on the upside that you don’t have to pull a permit for a roof in that county, then that’s a plus. But for me, I just plan I have to do everything the exact same way. And when we look at it, then maybe there is a plus side there.
Adrian: Okay. So, you pull like the HVAC permits if you’re replacing the HC system and all that kind of stuff. And how do you find these deals? I mean, are these do you search for like are these listed under vacant land, or do you go out and look for listings for mobile homes specifically? Like how do you find these deals?
Adrian: The way I’ve traditionally found half of my deals is exact same way every investor finds their deals, bandit signs, mailers, Google, Facebook, MLS, all those different things. The trick is you change the word house to a mobile home. And that’s a big difference. Now, the other way I found them and now it’s my primary way is I go to meetings. I love the real meetings. Realtors continue education. Any gathering of anyone in the investor world and traditionally for the people watching, I’ve always worn this shirt. My wife buys mobile homes. I love today I’m wearing my education shirt, but I stand up at meetings and I say, my wife buys mobile homes and I let people know that. And any meeting I do that, there’s always someone that comes up afterwards and they look at me weird, like, why would you buy those? They depreciate and they talk all this bad stuff. And I say, You’re right, they’re terrible investments. Send me all over by them. And so really, it’s a joke and I will help anyone, but there’s a lot of people that don’t want to deal with them. And that’s how I’ve gotten a lot of my leads. And I try to keep I don’t try. I keep everyone in the deal. I want you to get paid because if you get paid, you’re probably going to call me again. Yeah. And if you get paid more than the other person, you’re probably going to call me first. So, I love paying people, realtors, the same idea. You know, when I was buying those at 30, 35,000, all in. Most realtors don’t want to do the work of the paperwork when they can do 100, 150, 200, $300,000 house for the same paperwork. They still want to help people. And I became a referral source. So, realtors and other investors, really are my biggest lead source, and I’m moving completely in that direction. Now it is my personality. I love going to meetings, I love getting educated. I love going to trainings. So, it fits something I already enjoyed doing. And then the benefit is I’ve been getting a lot of leads that way.
Brian: Well, you know, it goes to show that there is no replacement for good old-fashioned networking. Right. You know, to use another one of that kind of trait sayings, you know, the extent of your network determines the extent of your net worth. Right? So, all right. So, I put a link in the comments here to where people can reach you. That’s AdrienneSmude.com. And we’re going to put another link here to where you can learn about mobile home investing. Mobile home university’s someone that we’ve worked within the past. So, Adrian, I was asking you before we went live here on the show, whether you sell these mobile homes, turnkey, and you were saying that you do not. So, you can’t you guys can’t reach out to Adrian to buy his property. He’s hoarding them.
Adrian: Yeah. I was going to say, there are two easy cash flow once they’re set up. Like, I feel like I do all the hard work then. And maybe if I had more drive to build this big business, I would do it. But I, I actually enjoy the tenant side. I know I’m very rare. Most people don’t enjoy that side of it. That is rare. But I do enjoy that relationship. And a little bit of it is breaking that stereotype because there is that stereotype of mobile homes and it’s there for a reason. There are a lot of slumlords and Myspace and I have a little thing I want to break that stereotype of, if I can, a tiny bit.
Brian: I love it. Well, Adrian, thank you again so much for joining us today. This was super fascinating. I love it. I love any kind of creative, real estate investing people who are going off the beaten path a little bit and doing something differently, which you are definitely doing. So, I know everyone got a lot out of this episode. So, Adrian, thanks again for joining us.
Adrian: You’re welcome. Thank you for having me.
Brian: Appreciate it. Absolutely. Well, we’ll see you guys’ next Tuesday at 2 p.m. Eastern, as always. And have a great week. In the meantime, let us know what you want to hear about next. All right. See you guys.
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