Mobile Home Notes as an Emerging Investment Vehicle | Real Estate Notes Show

Episode: High Note Returns + Affordable Housing Crisis Solved? The Shocking Truth About Mobile Homes Dave's Goals and Plans: - Exploring seller finance notes and owner finance deals, strategizing with partners - Hesitant about mobile home notes - has done two deals (one loss, one marginal profit) and has been reluctant to pursue them since - Avoids land notes due to concerns about foreclosure and resale challenges - Met with other investors to reconsider mobile home notes as a potential asset class Nathan's Goals and Plans: - Currently in Utah helping oldest daughter settle into school - Taking slower pace during summer months to prioritize family time - Seeing increased deal flow and exploring hypothecation on seller finance notes - Recently observed tipping point in market with 25-75 non-performing to performing notes ratio shift - Exploring hypothecation structures with trusted partners and fund models Key Recommendations: - Check your ego and ask 'what don't I know?' about unfamiliar investment topics - Only pursue hypothecation strategies with people you know well and trust deeply - Vet guests and educational content carefully before presenting to audience - Collaborate with competitors in the space - share knowledge to bridge gaps Topics Discussed: - Mobile home notes as emerging investment vehicle - Affordable housing crisis in Arizona and nationwide - Hypothecation structures and risk management - Non-performing notes market indicators - Importance of work-life balance and family in real estate investing - Collaboration vs competition in the note investing community Guest Insights: - Manufactured housing on leased land addresses affordable housing emergency, particularly in Arizona top-10 market - Seller-financed mobile home notes originated due to market demand - most buyers need $50-80K financing - Mobile home parks lack sophistication to remodel vacant units; Win Mobile Homes fills that gap - COVID-era permit freezes created multiyear shortage of new affordable housing stock - Market shift from transient ownership to primary housing - buyers seek 15-20 year occupancy with pride of ownership - Remodeled homes priced 30-40K cash basis see demand for higher-priced quality alternatives [Music] welcome back to another real estate notes show I'm your host Dave puts alongside me as always Mr Nathan Turner hello hello how are you today we're talking about mobile homes before we get into Mobile Homes it's been a few weeks since we connected right it's it's been a while we're taking it slow in the summer time so we make sure that you know how you been doing how's life been this summer it's good good so far we're right now we're actually in Utah oh oldest daughter is starting school here in a month and so we're down here helping her get set up get you know settled into her she doesn't actually move into her apartment for another few weeks but getting everything else going student ID all that fun stuff just getting that all set up life right life happens out of real estate and we made a post y other day regarding you know how do you get your kids more involved and someone made the comment just time right um so it's it's it's it's cool to see this kind of going on but I think for us living this is the whole point of living life right the idea of investing to make means to be able to do things with our family yeah absolutely it's it's funny you know uh a few weeks ago I was down in California and stopped by Matt Kelly's place oh nice for lunch and and had a great time and and you know Matt Kelly and his way he he said something about I mean we're hardly working yeah I'm like man isn't that the truth you know like and not to diminish what we do because there's certainly work involved but yeah you know we're out there going out for lunch because we can and it was just nice you know and that's that's kind of what this has turned into and and again not to diminish anything because certainly work there are definitely headaches there are things to deal with every day but uh absolutely but then I also get to you know take a week and a half off go down to Utah to help my daughter get set up for school that's amazing and you know with life goes on um our kids are important our fam is important um and the people we connect with are important so it's always good to kind of spend time with people so um I see Sydney on Facebook commenting that she saw Matt over the weekend that's awesome right spend time and you become those who are not familiar with this space this space is real small we all become really close friends even though we're not the same company we're investing differently we're still friends and we get along really well uh with that said sometimes we're even competitors yes we're still friends yes right um with that said though what we realize that you know Investments can go come and go and things happen um but I think for me um is luring off each other and bridging that gap of knowledge right and sometimes we have to check our ego to Door um which is difficult for a lot of us and really difficult for some of us right and because we think we been in for X period of time we know a lot of stuff and what sometimes we have to check out the door and say okay what do I not know or what do I not know about this particular topic because that's a huge fashion right I've been seeing acids come through uh yes a good comment from Patrick I'll put on the on that video is that you know it's all collaboration which is absolutely true um thanks Pat Uh Patrick so you know I've been looking at a bunch of asset lately regarding some seller finance notes and some owner finance and and helping them strategize but it all comes back to leaning on those who I relate to closely to ask questions of um just get an idea of where we're at um where am I missing what am I getting from it so I think it's really cool that we have that um how has business been for you in regarding seeing assets Supply are you seeing any change in your in inventory or what's coming on your you know desk yeah there's still quite a bit of of uh deal flow out there I am branching out and looking at different things so a friend of ours that was on the call the other day with our private call um talking about hypothecation on some notes that he's creating and and I know you've dabbled in in hypothecation it's something you're a little bit leery of at this point but for me for my structure and and Jay said it well like it really comes down to how well do you know the person you're dealing with true and if I have that kind of confidence and Trust in that person that hypothecation model for me in the fund it works really really well and so that's uh that's something we're exploring more as well absolutely and we'll talk after I got some interesting want to try out and we'll talk after the show about it um but yes I sent you an email the other day to another another Ang interesting stuff we'll we'll see we'll bring it on the show once we feel comfortable that it's something that we feel good about you know we explore a lot of things right we explore a lot of people to bring on the show but really be careful what we do because we want to make sure you guys get the best and greatest things we can possibly come up with right for the show um you know we're talk about mobile home parks and some topics about land notes stuff like that and also just some really cool stuff that's going on um that may not be in our Niche right and we have a lot of audience members who are creating notes so those who are creating notes we're still there for you guys as well because we're bringing on people who are top dog people in the field creating notes and originating them yeah yeah and that's been such a great connection many connections actually over the last couple years of some of these not creators and teachers I mean it's the same business it's a different arm of the business uh and we can definitely work together and and we do work together and so we're excited to make more of those connections yeah and I have seen an influx of non-performing notes come across our desk so we're starting to see the break yeah uh we saw tapio day where it was 2575 non-performing performing um which means something's happening right we'll see where it goes from there um and we talked about getting outside of our comfort zone right um you and I have been the two things we don't touch is a land notes we kind of avoid them because we just don't get the idea if we the for clo on it selling it yeah and we've had a good debate about that but then we've also talk about mobile home notes in this whole idea of bringing on a mobile home note as a note instrument to buy and hold and for clothes on and all stuff it's a whole new market right and and we're kind of hesitant about it I've done two in my career one I lost a little bit the other I squeaked out and it turned to profit but I got lucky and with those two I I've been very hesitant to look at anything since and then we meet these other guys and we're going let's have another look yeah well well without further Ado let's bring in our man of the hour and talk so Alden tell us about yourself uh hey yeah appreciate the time here today great to connect with the both of you after DME but yeah I'm Alden gardo I'm vice president of Win Mobile Homes when mobile homes operates as a licensed manufactured home dealer here in Arizona we buy remodel resell manufactured housing on least land which is definitely a a big topic uh trying to find the validity of that asset and you know ultimately uh what the uh risk factor is in manufactured housing uh so we've been buying remodeling reselling and then found out that there's an opportunity in the market to originate a seller carry note because not everyone has the 50 to 80,000 to uh put out on a home purchase most people need financing so we found an opportunity in the market to start originating seller carry notes uh and run them through their formal processes uh so that's just a little synopsis of what we're capitalizing here in Arizona and I think that there's a big market for this product why because the lack of affordability in my market of residential real estate as well as lack of new builds from covid so during covid they H had like a year and a half of not issuing new permits for products to come out on the market as well as as a multif family rental rates have gotten to all-time high so really for our Market here in Arizona and possibly other markets throughout the country uh there's I think there's a big door of opportunity for affordable housing which is a state of emergency right now uh across the country and especially here in Arizona being a top 10 Market uh you know and the lack of new products coming out on the market for individuals to facilitate a quality affordable housing program whether that be by rental or you know conventional ownership it it's a challenge and a problem and that's what we're capitalizing here in Arizona how did you get started in this what brought you into this so yeah uh 16 years old my father was buying homes at the bank house steps so I was uh evaluating forclosure homes trying not to get shot in the East Valley uh and ultimately you know getting some chops in the industry uh did some other things as far as uh you know fine dining and things of that nature but in 2018 uh my father actually was approached through an education seminar that we were involved in uh from an individual that was buying and selling mobile homes and he actually had the idea to se buy them and sell them to Parks like outside the state well I'm like you know the the value is really where the home's at for some individual to facilitate home ownership ship opposed to the challenges that come with the move of the home and you know the permits that are needed we saw an opportunity on a modified model that was brought to us uh in order to buy that same asset remodel it there sell it there so it's never moving and a lot of these homes uh ended up moving once in their entire life it was from the factory to that lot and uh a lot of that happened in the 70s here in Arizona that's when a lot of the Parks were built uh so they moved at one time to that Park and they sat there for 40 years uh and we found this to be an opportunity to buy that dilapitated asset where these mobile home parks don't really have the savviness to remodel them and reperform that product they're a landlord they're just looking to you know collect their lot rent well they found this you know maybe two or three homes that come back in their portfolio and they're like man it's trashed to put in a new property is $100,000 plus setup plus transport you lost six months of cash flow it's a it's a challenge uh so we fit that need within this Market of recash flowing these properties when we find them out on the market uh and it's blossomed it's extremely blossomed here locally in Arizona uh because a lot of parks like I said don't have that Savvy nature to uh remodel it or get raked over the coals by a contractor you know all all of that is to account for uh so over the past couple years and where we started in 2018 we bought our first home hired our first rehabber uh you know did some Market testing and through that testing here uh we saw uh at a cash price you know people were purchasing around 30 to 40,000 homes that needed work still uh and that be that created an opportunity for us because we knew they wanted a nicer home and they were willing to possibly even qualify for uh a higher purchase but those products were really so much out on the market uh so facilitating that need for more quality housing they you know serviced AC units new Electrical uh a quality home that they can live 15 to 20 years in opposed to the uh connotation towards short-term ownership in mobile homes where now we we've found that within this Market it's more of a primary solid housing source for individuals because the lack of affordability as well as the people want pride of ownership sure you know who who doesn't want to own their own home at the end of the day and to fit that need in an affordable price point that's offered in a manufactured home on lease land opposed to average purchase prices here in the valley are about $450,000 we do it to qualify for a $400,000 mortgage you have to make $80,000 a year with no debt who not many people could qualify for that especially here in Arizona so I'm going on a little bit of a ramp that's okay that's okay my man it's all good so let's ask some good questions here to kind to get some stuff first off let's define some things for those who may not know what do you mean by what's manufactured home versus a mobile home absolutely yeah so there is a definitive factor of manufactur the date so in 1977 I think it was August they made uh building codes that were uh non-led you know non-led paint uh ESB bestus uh you know faulty wiring and uh updates and plumbing so 1977 and before are considered mobile homes from my understanding post 1977 they changed the name to manufactured home which was a HUD uh guideline because of the change in building material uh so that's the kind of differentiator uh a lot of the times these mobile homes you know really moved one time in their life uh from the factory to the lot they they may move it's a possible to move another time uh but often times it's financially uh non ad vantageous so I think most people when they think of mobile homes they think it's on Wheels you pull it with the trailer you park it yeah they think RV this is not an RV it's not on Wheels uh if it's post 1977 there's probably no tongue on the front in order to hook it up to a trail uh a a transport unit they're on a factory uh I think they're called stilts uh that they end up removing the axles they take the tires and they set them at that lot really with a long-term mindset these Parks themselves are the ones that primarily brought them in in the 70s and if you think on an Institutional play to own the park you want that home there as long as you can keep it there you know at the end of the day because that's your your business model so I think Nathan's on to something because I think you know I look back my grandmother lived in trailer metal sides metal roof and it just didn't look like a home it looked like an inexpensive cheap thing and you walk inside of it and everything was kind of built cheaply 100% that's the old homes right this is the pre1 1977 this is back yeah I mean I was in the 80s going to visit her right so I think that what you're saying is before that they were built differently and their structur differently and they were really built for a motor vehicle way of living versus I mean she never towed it they never moved but that was what's in my image of a mobile home is this you know skirted RV yeah no and it's a big negative connotation mobile homes you know they travesty of the Netflix uh series that came out Trailer Park Boys you know the that just paints a really bad picture I think of this environment and really here in Arizona 10% of homes in Arizona are mobile homes and manufactured housing that's a lot that's a big Market I do maybe 75 homes a year we're not even scratching the market and those homes that were pre 70s are now coming du they just went through their first 40-year life cycle and Dave your grandmother's moving out next week or whatever yeah and transitioning in life cycle now the Park's taking back that unit that has metal sighting and all of that that's an opportunity why because it fits on an acquisition to buy that property rehab it and match a price point under what the new homes are going for for replacement cost so like a new home and a quality Community could go for $175,000 well if I can buy that mobile home at 5 to 10 grand and put 50,000 into it and we did new uh Electrical Plumbing siding paint everything and it's literally almost like we're manufacturing a new home not not literally but uh yeah you know it it fits fits that model those homes came through the life cycle they were all brought here in the 70s these Parks don't know what to do with them they're like hey man this night and shining armor comes through and wants to take on the potential risk of buying that property rehabbing it up to Quality getting a qualified client and then on the back end having a better exit strategy potentially of originating a seller carry node if you can't find a cash buyer you know and you get them fully qualified it opens up a a a more concrete idea of like pricing where you're at in the market you know cuz if we can match a seller carry note on that home with Market rent the advantages are that individual gets pride of ownership on the investment side they can't go anywhere for cheaper you know they were possibly crying at closing because they were left out of home ownership they've been told for 10 years they don't qualify you know on residential property there's a scarcity in financing on manufactured housing uh there's not all that many many options I think I saw Joe Biden I just wanted to clarify so you get this old 1960 trailer right are you C the tongue off are you detling it are you making it a fixed with Foundation are you going that severe or where are you what is the chain or from what we see as a trailer to being a home right do you put a foundation on do you cut the tongue off do you make it so that it never could be put back together and pulled out again yeah so uh in technicalities it could move it could move but the financial requirement in order to move that property set it up on another lot get permits and restore the lot to its original condition you're talking about a $50,000 play on a home that they may have paid a hundred for they're like man you know unless they have a pre-developed lot that they bought and already developed and has City utilities and things of that nature it non financially advantageous I think what me Nathan see is them hooking up a F150 to it pulling it down the street yeah and my asset's gone right sure that couldn't happen and why can that not happen because there's no tongue on the on the property these properties don't have a hitch a trailer hitch or anything like that you'd have to go buy the uh the MVD uh uh required uh axles and the tires find a transporter uh you can't just move these with the F-150 you could maybe try but it's not going to get off the lot got but yeah it's really go ahead so my other question then is like what's the difference then between a manufactured home and a regular residential home absolutely yeah so a mobile home could be quote unquote permanent affixed to a lot which Dave mentioned detling and creating that mobile home and lot into one so now that's a real property residential real estate treated as such these are uh titled through the Department of Transportation so it is technically like a car title but there is a Secured Title on that specific unit uh and that's where the differentiation lies right you have East land mobile homes that's considered technically personal property and then you have like Dave mentioned detitled mobile homes that are permanently affixed to the lot they got tied downs and things of that nature the big difference I see with the two of those products in my market here in Arizona is you're talking about a $250,000 purchase or a 50 to 100 so it's definitely a different buyer Financial requirement financing and things of that nature so those are just the differentiations between those two products so I think we had a question on here is that you know on the chat uh and I definitely Cindy I'll get you in a minute was you know that you can write into a promisory note that it can't be moved I don't think our fear is that right our fear is if they already defaulted on us and trying to get out of town with our ass said that's where our fear is right so if they're pulling away we assume they already stop paying making payments sure right so we're worried about our scenario of fear is we have Mr Smith Mr Mrs Smith who are paying us great and then they sto paying us when they stopped paying us they didn't hook hook this thing up to some kind of truck flat bed whatever and pull it out and now we go to Fore clothes on it and we have nothing to foreclose on or yeah or in Tahiti afraid you know hopefully not that's you know yeah that's a that is a go ahead Nathan sorry to cut you off no go ahead I want to hear what you got to say that and then I'll I'll add to my my experience yeah so uh first off the individual that came in and bought that home originally from us maybe on a note right they sign also a lot lease with where that that part uh that home is at in location contractually within their documents as well as ours uh it requires them to one let them know of their uh their intentions of either moving that property or uh things of that nature as well as they're contractually required to return the lot to its uh pre-existing condition which means you have to grate that lot you have to remove the two uh big cement paths on top of that like I mentioned previously the financial requirement in order to do that the planning the permits the uh communication with a transporter because you have to have a licensed transporter the transporter is can go talk to the park you know make sure all of those ducks in a row if that were ever to happen uh but they are contractually required to fulfill those requirements why do I bring that up because if an individual is going behind on their payments technically in a mindset they do not really have any money to relocate that property why would they be going behind on the note and then have an extra 50,000 out of nowhere you know to go move the home it just doesn't so much make sense the Boogeyman in the closet doesn't is not really there anything could happen right you know there's an element of risk in every uh investment strategy but it's important to see that dynamics of financial requirements contractual uh agreements of what people are responsible for if that were to happen as well as a lot of these people are moving in to really they want they this is their either first or last place to live uh majority of the time where they've owned this property whether it be 55 and older or a new family well the new family wanted a solid place to live where they wanted to live at they may have school pickup in that community and the 55 and older individual wanted to retire affordably you know in that area they're not just buying that home to buy the home they wanted to live there off those cross streets their daughter lives down the street or what you know whatever that may be those are a lot of positive factors to reinforce the fact that that home and that tenant that seller uh that seller carry owner wants to be off that in that area and things of that nature go ahead NE I'm go ahead ask your a question because I have a followup as well regarding some numbers yeah so so like I say I bought two mobile home notes in my career here over the last 15 years and and um on the first one it was non-performing this was back when everything was non-performing and and uh so I went to go and foreclose and then it was not a fix to the property so I was foreclosing on personal property and it was just it was a completely different process and it was a little bit funky the second time that I bought the note I I thought I had done all my homework and I'm like okay so it's fixed everything's cool everything's good uh it was in Nevada and then I came to find out that in Nevada there's actually two steps to the process and they'd only done the first step so it still hadn't been a fix so with that I'm like you know what I don't know this well enough I don't I don't understand it so I'm out so can you walk us through if it's still technically a mobile home if it has not been detitled if it has not been fixed to the land what's what does that look like in case of default how is that remedied yeah so uh we've come across a great attorney here uh in Arizona that we've put on retainer and he kind of showed us the ropes you know over the past five years uh so ultimately uh on top of that we have some other previous Park management uh that works with us so we know exactly what to do what proes Etc but again it is a different process it's a it's a car title this is not real property you're not going to uh the uh residential courts to get a foreclosure entirely different process it being leased land we go through a formal uh eviction processes and then a Affidavit of repossession so we repossess that property after they go through an eviction processes of non-payment depending on the terms laid out in your document so obviously uh on the note or a contract or whatever was secured you know with the lean uh it details what the time requirements are uh to issue that repossession and formal eviction things of that nature communities themselves have other uh binding agreements within their lease so if they go nonperforming with the park on either side either our note that they stop paying or the community ends up stop getting sto payment that with in like 40 days the community will have them out and uh talk to whoever's on title so either the lean holder or who originally owned that property they did it all for us technically uh when we start getting either late payments or nonpayment we're doing the best of our ability to try and work it out and really you know do we want to take the property back we really don't right no one wants to do that we bought we did it for a performing note we put Jenny May in her house she qualified for that note we want her to have home let's talk some numbers here right what what's the term of these notes what is typically a down payment percentage of the ter of the overall Pur and what rate of interest are you doing yeah so uh our our Benchmark right is our regular motus oper Rai we're doing about 10% down payments we're seller caring at either a 10 or 20 year program 10 or 20 depending on uh what those payments look like with a higher purchase price we're going to have to carry a little bit longer just because where rental rates are currently okay uh and and then we're originating at 14% so we seller carry at a a decent rate in order to not only get the individual into the property but also create a savvy strategy on the back end to entice an investment client into a non-conventional asset strategy uh so those are kind of the numbers and those numbers really match Market rent which is the biggest win I think you're not only potentially acquiring a note uh that's a high return but also the grade of that investment strategy ends up being elevated because it fits within the affordability of our Market uh a and if an individual can't go somewhere for cheaper and they uh you know find pride of ownership in these homes it it's really a winwin win yeah for the the investor for the homeowner for the individual that bought remodeled resold the property for the institution that owns the park it really hit a lot of boxes so Sydney asked a question earlier these older homes that you're rehabing are they still on least land I presume they are yeah so we buy homes on least land we rehabit on the least land there we sell it there so we're not buying on a lot you know from the wholesaler uh you know cross country moving it here rehabbing it here those homes were already placed with City Utilities City Water city sewer they have amenities in the community like pool jacuzzi fit Center on-site management Park Community office but again they're on that least land uh Community they're not in uh often Cass a grand on one random lot you know out in the boonies it's in an established institutionally owned Community they have their rules and rs and things of that nature it sounds to me that the park would actually help prevent situation of the borrower try and pull it the m home out of there right um they also go in the point where are some parks set up that if the borrow defaults they'll keep making the payment for the borrower um I haven't quite come across that yet I've heard of that with the larger institutions uh like 21st Mortgage is the largest national lender of uh personal property mobile homes and I think they do have a clause in their agreement that the park signs that says something of that nature where it's either like deferred or uh they don't it can't come to them for the attorney fees it it's a little muddy because I'm uh I'm the little guy on the Block it's all good I'm not I'm not quite Warren Buffett in 21st Mortgage uh but you know that creates an opportunity if if a if a community themselves is not a savvy uh they don't like that that uh guideline where they have to co-sign that loan or they have to forbear those payments they're going to come to us they like hey you know we got this deal over here uh we we like what you do we're have an established relationship here in Arizona with you they start kind of chefing us deals uh and and obviously the risk mitigation on the front end is extremely important to make sure that we're not getting burned if we were to take a property back while still being responsible for these small fees Associated towards getting the asset back and recash flowing it uh the the mitigation on the front end is definitely important I know a lot of mobile homes that I've overheard of usually are fiveyear terms I understand extending it um and I get the whole I know someone made a comment regarding you know do Frank and Usery laws and making sure it's not above you know State specific rules um absolutely but I think is there any kind of restri restrictions regarding how long that term of that you know motor vehicle loan can be yeah so uh I piggyback off my great great-grandfather Warren Buffett Warren Warren Buffett 21st Mortgage he originates notes at 25 and 30-year mortgages and matches sometime our rate what is that rate oh that's 14% you're telling me that Warren Buffett and 21st Mortgage is originating personal property chatt loans on 25 and 30-year amortised interest rates of 14% that's quite interesting isn't it yeah wow 14% for 25 years you know and these people you're right these people don't me and Nathan's talked about privately is that low-income housing is definitely a need in United States right people don't have the money uh people don't want to pay a lot um and if you could be below rents you're going to grab the people who want to rent but just say listen I might as well buy here for rental um 100 you know they own the land all stuff I I and I'm presuming that most these are there Community set up with HOAs where they cut the grass for them and things like that yeah so uh it's not HOA it's called lot rent so you're a lot leas in a lot least Community right you have the uh real benefits of kind of an HOA uh of shared facilities like amenities pool jacuzzi uh fitness centers where they don't have to have pay to upkeep those uh personally you know things of that nature uh they are responsible for their lot so like weeding and things of that nature but here in Arizona you know it's really low maintenance it's not like there's a whole lot of grass out here uh it's a lot of just lava rock and things like that but the the communities really do a great job I call it the finger wave you know of of talking to owners and making sure that their lots are clean they want to have a a clean safe environment because of you know where the institutional strategy is for these parks are buying them for the 50-year return uh these mobile home parks and they're increasing uh values increasing quality waving the finger here and there uh to try and make sure that the every things up to par so Rick made a comment that most banks can't loan on preh HUD mobile homes just information I know we put it into the the video but just FYI go ahead Nathan so and you mentioned it there but that was another question m is values um what's appreciation like what's what's how does that compare to single family yeah so uh conv uh historically mobile homes have not appreciated it is considered a depreciating asset what level of depreciation is highly contingent on location the community and the current economic environment in the country so we started flipping mobile homes about seven years ago we started doing nodes about five over the past five years we've had the unfortunate uh happen where we've had to take back a few I've like five maybe over five years something like that coincidentally we just saw the biggest appreciation in residential real estate from covid as well as the lack of housing here in Arizona I made more money on those homes than I'd care to explain yeah uh retaking those properties back getting appreciation on that asset that historically hadn't appreciated now that being said is that going to happen every time no that's not going to happen and I think we fear the fact that that the we call the co bump of appreciation is kind of screwing some stuff right in last five years everything is doubled and not tripled sometimes where if you look over you know if you hold that note for 20 years is that property worth five grand at the end of it right what is that property worth at the end of it where if we're 12 years into this note and that was sold for 100 grand right and in 12 years from now if I bought a residential note that thing may be worth the buck 5200 where that mobile home may now only be worth 30 or 40,000 on normal terms right if you bought it a mobile home today 10 years from now without the weird bump that we're all going through sure what would that value be and you know that's I think our fear of going too far with these kind of homes and why most people don't do more than five because that value yeah no um I think really I can only speak about my current market Market not a guru in every state or anything of that nature by any means uh but here in Arizona there's really been an interesting uh Revelation that's come to the table because of the high desirability of these locations uh like Tempe Mesa a lot of uh Fortune 500 companies are moving here to Arizona on top of that the population density with lack of housing alone here in Arizona I think that we're seeing a lot of growth that we can't so much facilitate housing for the individuals that moving here to the market on top of that with the lack of housing here in Arizona the uh uh where was I going with this uh oh the buyer has changed so it's not so much the same buyer anymore who could barely buy this home originally they were scraping by was literally the cheapest place to live that they could find ever uh and they lived there for 20 years well that individual doesn't have as much pride of ownership and maybe cleanliness and upkeep and and it didn't have you know Granite counters and drywall and things of that nature so the dynamic being changed of the buyer yeah I think will ultimately help values hold strong not only because the location and high desirability as well as population growth here in my market but also that individual is now going to take that much better care of that property opposed to an individual getting that home back and there it's a hoarder house now or you know whatever it may be that's the historical connotation towards mobile homes they get it back it's trashed there's in the floor those are the homes I'm buying and I'm doing a a full rehab higher level of quality as far as cabinets Granite counters sure tile bathrooms it it'll hold that in my opinion because of the location and the higher quality as well as new buyer who's going to take that much better of that product I think that it creates a stronger environment to hold values higher than historic representations of a depreciating mobile I think what other fears is the structure of the actual property right I think the idea is that I again to go back to that metal shed we call a trailer right are these new ones not like is it you know my grandma's Trail was rusting out right there's holes in the side of it because the rust just went away 100% are these structured differently are you changing the sides from a metal roof to a normal roof metal sides to a normal side to avoid the fact that that not even depreciation but the house is falling apart then 50 years it's dust 100% yeah um those are the homes I'm buying the not you know older homes uh they are uh disintegrating almost because of the products that they used at that time and us going into these properties doing new it's called t111 t111 is the new sighting that they're putting on all these brand new homes uh and that upgrades the insulation value of the property uh it's really important here in Arizona it's like 115 degrees here right now uh but also going through and doing new electrical and plumbing and things of that nature making sure subfloor uh uh sturdy and up to par there's no holes in the ceiling holes in the siding uh the benefit of the metal roof is the surface is so easy every five years you buy a 10 gallon bucket of Henry solar Flex from Home Depot and you coat the the Dickens out of it of the roof and seals the entire roof the benefit here in Arizona is not a whole lot of natural disaster so no like big tornadoes or uh you know crazy crazy storms things of that nature uh but to answer to your question we go through these properties and to the best of our ability make sure that they're almost like a new home you know uh making sure that when we sell a product to an individual we want to hedge our investment we don't want to sell a piece of trash and to a a a non uh a less qualified buyer who's ultimately going to have us take that property back now we're in the jam because we never rehabed the property originally it it's uh all on the front end like like you see you know changing those qu the quality of that home uh the cabinets that come out of new mobile homes are all dingy cabinets they're not nice quality Cabinets even on a new home out of Clayton and CCO they manufacture their own cabinets we're buying higher quality Cabinets Granite you know making sure things are up to code and things in that it's so funny you talk about granite and countert that I've never looked at any of my notes and see what kind of countert they had I've never looked at cabin I've never I don't even care what kind of fridge they got right I care about the fact in 30 years what's that value that property get possibly be because in 15 I may have to for cloes on it right no 100% And I I bring those factors up because the home's going to last a lot longer than the previous materials that they had used these are you using studs on the outside are you putting studs on the outside or are you just covering over top of the old metal yeah so we're applicating on the outside with a uh B Vapor Barrier underneath that which adds to the insulation value with the double side of it uh but there's no need to add uh additional uh 2x4s unless that the uh structure is when we take the uh sighing and the uh the interior paneling off obviously if we're seeing anything that's a blaring concern we're going to end up replacing uh anything as well as you know like termite damage things of that nature uh ultimately making sure that that the quality of the existing unit uh in addition with our rehab and refurbish of anything that's you know needed we're doing a lot of cyclical processes they doing the same thing on the same house uh so it it's been a real uh kind of blessing to be able to fall into a a program where we know on every property it's going to fit these criteria and it's going to hold a stronger value am I going to say that these homes are going to appreciate I'm not so much saying that can they depreciate yes they can depreciate you know uh but the quality of that home to think that it's going to disintegrate over a 15-year program is is I don't believe to uh to I don't believe that to happen why because these mobile home parks are buying for a 50-year return if all 400 of those homes that they bought on the idea that this 50-year program is going to be a cash cow and its generational wealth for Black Rock van guard you know the big three that are buying mobile home parks if they're buying mobile home parks for the long-term idea of the Cash Cow of mobile homes and they know that these homes depreciate and they may let's say hypothetically to your uh point they all disintegrated in 15 years now they have to spend half of what they paid for the park to bring in new homes just for the same cash flow that just to me that doesn't make so much sense I see com from so let's pwi over to the idea of for those of people who are not looking to create these notes look at to buy them right um I don't know if you all for this uh so I apolog we asked this beforehand is do you ever sell a note that you created yeah so we do look at uh vacating the notes that we create under seller carry program right the notes themselves are fully qualified so the individual goes through underwriting and has a r stamp off on that note so an individual fits a criteria of 600 credit no pass criminal no open bankruptcies no past evictions and verifiable income now depending on how they verify that income we have some leeway doing like self-employment programs and things of that nature uh but also on top of our initial underwriting the community is also doing an underwriting for the community themselves so do we check for any convictions no what the community does the community does a full uh first underwriting so once we get their uh you know their application back from the community says they're good they go through the financial requirement of getting that seller carry loan uh and We're Off to the Races and at that point we make a decision okay are we needing to recapitalize to go out into the market and uh go after other opportunities and sell that note to an investor at the full face rate or we hypothecate it which you had mentioned earlier and I think that for personal property mobile homes for Capital investors the hypothecation model I think fits a little bit better for this type of asset class why do I say that because we have such a cyclical processes we're a licensed dealer we have 10 sales agents that already selling mobile homes across the valley for Jenny May and Roger that wants to buy a house we broker that house uh the advantage of the hypothecation is you have a vested partner within that note so if anything does end up going wrong or the note ends up coming due uh and we have to recash flow that property you have a vested partner that has boots on the ground we have about 12 to 15 rehabbers that work for us fulltime and a full sales staff so to be able to take that property back and re uh establish it out on the market creates I think a more secure strategy for an individual that may not be as savvy so the two are buying a not hole right which comes with this inherent potential risk of a going a note going non-performing uh and if that happens on a primary note holder we give them access to our back office uh so at Cost we'll allow them to use our attorney go through the eviction processes and things of that nature so they don't have to call uh you know John Rob who you know got $5,000 retainer or whatever which is a challenge you know you're trying to uh you know uh recast FL that property so anyway th those and then the hypothecation right so whole note and then hypothecation are the two strategies that we're offering so one of the question on Facebook was does do you offer loan guarantee for investors so we've talked about that there's no personal guarantee it is a pledged asset in order to garnish capital investment which is the definition of hypothecation uh that being said we have uh looked at that uh potentially to do a buyback not a personal guarantee uh but a potential buyback and those are things and in conversation uh right now as we're rolling out this fund so Silver Crest opportunity fund uh is a opportunity fund that we're rolling out to raise larger Capital uh from accredited investors backed by uh these personal proper property notes uh and the fund would probably provide some form of buyback or really you know at no uh no um no information to the investor we end up just retaking the property back and reselling it because it's in the fund we're all vested together yeah because I know a lot of us would love to buy notes especially at 15% right it'd be really cool to get those assets in our hands um would you be willing to sell off a one or two or are you looking for people to partner with you guys moving forward yeah so uh from Diversified mortgage Expo and Paper Source the note Expo meeting Nathan and Dave here I tell you over the past I think year and a half to two years from our uh growth and meeting clients at these conferences and associations and finding our Niche within this uh business we've grown an investment clientele list that's uh somewhat healthy could always grow more uh but that being said we've come into an issue of not being able to facilitate the demand for these notes that were currently originating here in our market and that created an opportunity for an individual to additionally take uh a first right of refusal on a construction loan so that allows us to take a capital investment backed by a lean for an investor on like a 10% annualized interest only payment or 12% deferred where on that specific note when we've already acquired it uh they get a first right of refusal on the seller carry note that comes available and really we did that we did that out of necessity uh for the investor uh where we wanted to additionally satisfy the demand and the appetite as well as capitalize further in our market like I said mobile homes are 10% of housing here in Arizona I'm doing I've done 250 in five years there's it's a billion doll industry mobile homes it's quite literally I think one of the net next most explosive markets in the country and Warren Buffett sees it he's owns Clayton and cavco the two largest manufacturers of mobile homes 21st Mortgage and then a few other uh smaller time lenders but with the state of emergency in housing and high rental cost High labor and material ultimately creating a high rental rate when they build the property it it really I'm excited before Nathan gets to his final question I want to some some our Facebook chat here going back forth was how do you find these mobile home for sale what's your typical strategy to find these homes um because that's always a difficult thing right and then let me add are you looking to expand outside of Arizona so yeah you know uh definitely looking at expansion the challenge with expansion is the boots on the ground so really I'm going to start courting I think some trusted individuals and other markets and start to figure out how we further collaborate and maybe make a brand play out of it uh where we go to like Florida or Texas yeah some hotter markets and then I I skated over your question Dave your question was how do we find mobile homes uh and uh we're actually rolling out an education platform called mobile mailbox money for people that want to buy and flip manufactured housing and that's called mobile mailbox money piggybacking off our uh our uh note sale website uh but that being said we found great inroads obviously with for sale by owners it's kind of a Cheesy answer uh but like you know scouring mobile home Village Facebook Marketplace as well as one of the biggest areas of success for Acquisitions from us is the parks going to talk with the manager who on the fifth of the month has to collect everybody's lot rent and on the seventh of the month Alden gardo rolls in hey you know who's behind on payments blah blah blah can they use a cash offer can we save someone from eviction today you know that's a big deal with a cash offer obviously on an asset that makes sense financially uh but finding those little bit more dilapitated homes depending on your uh savviness in uh rehab and things of that nature just definitely want to be careful uh about the homes that you're buying uh but Parks you know parks are a great asset the managers nine times out of 10 May uh raise a gun at you for walking in the door but it's about breaking that communication barrier because they they hear oh I'm a flipper or whatever and it's a negative connotation you know they don't really so much want to deal with that but when you involve a story of Hey listen we're buying this house rehabbing it here're improving your area here we're improving the quality of the community we bring private Finance for cell Cary like oh wow uh here I got three keys you want to go check these houses out like sure interesting very interesting Alden you're making a sweat you're making a sweat and think that maybe our hency has been a little bit um misguided you know and that is fantastic why is that fantastic that's fantastic because that means that there's more game for me and you guys here today I'm telling you right now that this is being overlooked by institutional uh investor that are buying these Parks may have to be quiet no seriously I'm telling you right now that there's a new frontier while Black Rock Vanguard and State Street are pushing people out of affordable home ownership in residential real estate and multif family rental rates they're hedging the market want to own 40% of Residential Properties by 2030 where does that leave people their income hasn't kept up you know uh labor and material costs are rising at alltime highs and meanwhile more and buffets just chefing it left and right that's awesome go ahead Nathan let you finish up our conversation yeah very interesting Alden we're learning a lot here um so we like to kind of finish off every one of our podcasts just asking what do you see coming down the pipe like what's your crystal ball on where the Market's going specifically with mobile homes and I think you've talked about that a little bit but what do you got for us yeah saw uh you know I think it was K CLA Schwab was saying that uh you know they're going to make some big changes by 2030 and uh Black Rock was like you're going to own nothing and be happy you know what does that mean that means run uh Residential Properties are going to stay unaffordable they are whether rates go down or rates go up they're going to hold strong because there's an Institutional appetite for these properties to hedge the market we just saw the biggest blood shed ever in the stock market where do they recoup those gains in residential real estate and owning these properties for a hundred years pricing out hardworking Americans new families and active retirees where do they go they go to mobile homes because prices I believe I don't have a crystal ball it is an election year our uh so you know we almost saw an assassination the other day there's a lot of crazy things going on in the market and I think that it it's all pointing to uh residential pricing and rental rates holding value I think across the board uh because if rents if rates go down prices go up and there's been a uh reduction of products coming out on the market because the uh covid delay the delay in permits now uh labor and materials double what it used to cost you know I'm going to draw my conclusion there there awesome well Alden hang out for after hours we appreciate if you need to reach out to Alden in the comments in the chat on YouTube this will be recorded on our podcast everything else um you can use the link to get his information uh but Alden thank you very much for some awesome information and swaying us in a way we didn't think we'd be swayed today yeah no happy to be here on the show recapping Diversified mortgage Expo talking to Nathan and Dave that's mobile mail box money baby.