biden tax changes impact on real estate investors

Sick of overpaying for single-family rental properties or apartment buildings?

Brian interviews Rachel Hernandez, AKA Mobile Home Gurl, founder of Adventures in Mobile Homes about what makes them such good investments. From lower purchase costs to higher returns, mobile homes make great investments for any investors willing to leave the beaten path.

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live off rents podcast transcript

Brian: Brian Davis here, founder of Sparkrental.com And I am here today with a special guest, Rachel Hernandez, a.k.a. the mobile home gurl and founder of adventuresinmobilehomes.com Rachel, thank you so much for joining us.

Rachel: Thanks so much, Brian, for having me. I really appreciate it.

Brian: Yeah. Well, I was telling Rachel before we went live that I am personally super excited to have her on here selfishly because I don’t own any mobile homes. I don’t really know that much about mobile home investing, so I am looking forward to getting some tips myself out of this and hoping to expand my portfolio to include some mobile homes.

Rachel: Yeah, that’s exciting. That’s exciting. I’m always excited when someone tells me I’m excited to learn about mobile home investing because honestly, not that many people are, you know, because they don’t know much about it. So, it’s exciting that you’re interested in it.

Brian: You know, so Deni and I talk all the time about how usually the least sexy investments tend to actually perform the best, at least in real estate, you know, so we do some land investing and investing, you know, like investing. It’s not sexy. No one’s going to put out a TV show like, flip this parcel of land, you know? but that’s cool. But that’s why it actually is. What one of the reasons anyway, why it performs so well is that you just have so much less competition in it, so you can earn some of those outsize returns, whereas everyone’s out there trying to invest in single-family rentals or flips because so well-known and it’s so well understood and so popular.

Rachel: Right, exactly. And then they watch those TV shows that they get, you know, ideas in their head because all these other people made money that they can do the same thing. But you never hear what the steps are leading to find the deal. You just find that they actually have the deal and then they’re just working on the house. But there’s so much involved. Brian, before, you know, before you even get to that deal and that’s what’s not talked about, you know, usually.

Brian: Yeah, and they only show the success stories on TV, too. They don’t show all the flops and, you know, they’re really ugly stuff,

Rachel: Otherwise, no one would be watching.

Brian: Right, yeah. So, as you guys join us, let us know where you’re tuning in from fire questions at us. You know, that’s the beauty of doing these shows live. You know, it’s raw, it’s unscripted, but you get to ask us questions and in particular, ask Rachel questions so she can share her expertise with you guys. So, on that note, Rachel, let’s rewind all the way to the very beginning how you got into real estate, investing in the first place and how that looks totally different than the investing you’re doing right now.

Rachel: Ok, sure. Well, basically my background is actually in sales and marketing. So, when I graduated from college, from university, my jobs, when when I first started out, I was an account executive for Fortune 500 corporations doing business to business sales. So basically, my background is a sales background and also had some marketing background because before that, I was also doing public relations for some big, big name entertainment companies. So, I got into real estate investing by reading the book Rich Dad, Poor Dad by Robert Wilkie. And I know that’s really cliché, but that’s kind of how I got into it. So, it’s not like, OK, I’m just taking everyone else’s story. That’s actually my story. As a kid growing up, I hated going to homes. I remember because my, my family, I came from a family of professional. So, we moved every five to seven years. And I remember just riding in the car with the real estate agent and my parents and looking at houses and going to open houses, and I hated it. So, it’s kind of weird that I actually got into real estate investing. But what I learned, I know, right? What I learned from Karzai’s book is the concept of passive income. So, this is actually income that is coming to you without you having to work for it, because before that, I just knew active income like you have to work for this income. So, when I read Robert Kiyosaki book Rich Dad, Poor Dad, the light bulb went off and I was like, oh my goodness, there’s this another type of income that can come in without depending on me to work for it, and that is passive income. So, after that, I got sold, then I got interested in real estate investing.

Rachel: So, for me, just like a lot of people, when you first get started in real estate investing, you need some cash, you need some capital before you can start buying and holding. So, what I did was I was a bird dog. First, I looked for deals for other investors, mostly landlords, and then also rehabers. And I would find the deal and then they would pay me a fee reward if they closed on the deal. And pretty much that was like a couple of hundred bucks per deal after that. And I got. Some experience then I got into wholesaling would actually find these deals. Same buyers and that usually they’re from the real estate investment club. And then based on their criteria, I would put the homes under contract, assign my interest to these buyers, and then I made a couple of thousand per deal. So, the difference between wholesaling and bird-dogging is you’re taking more risk with wholesaling, putting the deal under contract yourself versus bird dogging or not. But the difference is hundreds of dollars with bird dogging versus thousands of dollars with wholesaling. So, after that whole ice wholesale for a while, then I was able to buy and hold real estate properties as a landlord, single family homes. I built up enough cash, so I started acquiring rental properties. But like a lot of people, I got burnt out as a landlord, and one of the things that I didn’t like about being a landlord was that every single month I didn’t buy the homes. Straight out cash, I had a mortgage. The cash flow from the properties would go towards the mortgage. The bank would get paid every single month,

Brian: You Don’t get Paid.

Rachel: Yes, exactly. Then homeowners and you know, homeowners’ associations, then insurance that you know and then your aspiration to get paid. Yeah, exactly. And sometimes you don’t get paid. So, and then property management, because I thought, OK, well, I’ll just bring in the managers, you know, and I’ll just manage them now. It was a complete mess. I still had to manage the managers. They were still making their percentage, their commission. And it’s just like, I can’t do this. So basically, I did landlording for a couple of years. Then what? At the time of the market, I sold all my properties, everything.

Brian: Two thousand seven. Like that before the bubble burst?

Rachel: Yeah, pretty much. I was at the end of that. Yeah, right before everything, you know. And so, I saw my properties and I was like, OK, I got to get into something else. And then that’s when I got into mobile home investing. The Lonnie Scruggs deals on wheels. It was a course before it became a book. So, I read the course first, and I tried my hand at it. Actually, when I was a landlord didn’t work out because I just did it the wrong way. I talked to the sellers first, who wanted to sell me a property for like three thousand, and I didn’t talk to the park manager first. And then I talked to the park manager after. I’ve talked to the sellers, and she was like, you can’t work in this park, blah blah blah blah blah. So, I just got really, really, really turned off with mobile home investing. So, once I sold my properties, my single-family homes, then I got into mobile home investing. I said, OK, I’m really going to learn this. I’m really going to take the time to go over the material again and just buy these homes just for cash flow and just buy them straight out cash. And that’s what I did. And you know, I started this in 2007. So, I’ve been doing it for a while. I’ve seen a lot. I’ve had a lot of highs and lows, so it hasn’t been, you know, rainbows the whole time. So that’s how I got into mobile home investing.

Brian: Well, so first of all, I’m super jealous of your market timing there. I was that schmuck who was buying properties in 2007 rather than selling them.

Rachel:  Yes, I mean, it was just, I mean, the appreciation on these, I mean, it was crazy kind of like what we have right now. So, you know, actually right now, I’m actually offloading because of the way the market is right now, and I’m just getting these cash offers and I just you don’t see this. And then, you know, it’s just like the cash flow game. You got to just play the cards as they come, you know, and know the market and time, everything.

Brian: So, when you say you’re accepting offers to sell right now, is that single-family homes you still own in your portfolio? Or is that mobile homes?

Rachel: Those are mobile homes. The last one I sold, I think it was like a month and a half ago. Let’s see, six years ago, I think six years ago I bought it for, I think it was $12000 and it was just cosmetic work. And I had some people in there, you know, for, I think, six or seven years paying me. I think it was like four hundred and fifty dollars a month and they just decided to move out because they just wanted something else. And then I fixed it up. And the park managers like Rachel, you know, the market’s so hot and the park was selling their own homes. So, I was like, OK, so I just put it on the market, and I sold it for forty thousand cash. Nice. Yeah. In less than a month. So that’s kind of what’s happening now. So, and you know. It’s just one of those things, do you need the cash flow now? I mean, I’ve got cash flow, but then the cash, you know, so you just really have to see what your personal options are and what do you want to do as an investor? You know, everyone has a different plan.

Brian: All right. So, talk me through some of the mechanics of these deals. So, you buy the actual mobile home in within the mobile home park and you, you speak with the park owner to make sure that they’re OK with landlords owning the various mobile homes as opposed to the residents owning them.

Rachel: Right, either the park manager or the owner. If it’s a smaller park than you have the owner, I mean, there could be a park manager. Most times it is a park manager because I’m dealing with corporate-owned parks and there’s different kinds of parks. There’s like low end parks, middle of the road and high-end parks. And in the beginning I just worked all the parks because I was like, oh, just give me any deal. But then I found out that my personality really catered towards more the higher end park, more the corporate owned parks, and that just fit with my personality, with the types of managers that they did have. So now I exclusively deal and like corporate owned parks, but it’s different for everyone I know other investors who work in low end parks. Some investors work in middle of the road type parks, but I buy the home as personal property not attached to the land. And the advantage is that of that is that the taxes are lower because it’s personal property. It’s like taxed like a car, like a vehicle and tax is actually usually they go down instead of up because their personal property and then the insurance is less as well, too. So.

Brian: Right. So, so you depreciate that down, I guess, over time on your taxes

Rachel: As now, no, I don’t do that. And actually, I had actually asked my mentor, I had a mentor when I first started out, and now I have like multiple mentors. And Lonnie Scruggs was my mentor as well, too. But I had a mentor and I met her at a real estate conference, and I asked her that question. She’s like, no, because you still have to do the recapture, so it’s not even going to be worth it. So that’s for me. I don’t I really don’t do it. I just OK, straight out, OK, this is what I’m making, you know, income expenses and then whatever else, I don’t do any of that depreciate because it really doesn’t matter to me.

Brian: Ok, all right. So now these, you know, in my head, I’m imagining like trailers in a trailer park, but I’m guessing that that’s not actually what’s going on here, right? These are probably not actually on wheels like these are what manufactured homes like double wides that are pretty stationary and pretty nice.

Rachel: Yeah, well, basically, OK, those what you’re talking about that they’re already on wheels. Yeah, those were like the older version of mobile homes back then. What I’m talking about is like the newer homes that they get transported because you put wheels on them. But then once they’re set and blocked at the location that they’re going, they remove the wheels, they remove the axles, and they get set. They have to be set. There’s a certain standard depending on the area and the city, and that has to go through an inspection process as well, too, and you’ve got to get permit to move and all that. So, they actually set in the park and the type of neighborhood you’re going to do business on. It’s going to depend on what kind of park you’re doing business in and how strict their management is in terms of what types of homes they accept and what types of homes they don’t accept. So, it’s not like you’re in a single-family neighborhood where you can just buy anything and you know you’re in someone else’s community, so you have to play by their rules. So, it’s kind of that extra step. And that’s why there’s less competition as a mobile home investor. Because of that extra step, you have to actually create this relationship with the park owner, the park manager, to work in these parks.

Brian: Ok. So, are these are installed on a foundation or not?

Rachel: Actually, it will depend on the park because they’re the ones since they own the lot. They are the ones who actually prepare the lot, and that will depend. If they’re within city limits or outside city limits, then they’ll have to be going by the guidelines of the county, how the law is prepared. So, I’ve been working. I’ve worked in all types of parks. So more of the higher-end parks, they already there’s a concrete pad already. So, I mean, they’ve already leveled it everything more of your low end or middle of the road type parks that are not as managed as well. Sometimes they’re out of city limits and the county guidelines they may not have. A concrete foundation may just be dirty. Or, you know, it really depends. But that’s why you hire a mover. And then, you know, the installer and then it’s under their license if there are issues in the future.

Brian: So, OK, so do you buy these new from the manufacturer and then have them installed? Or do you buy them used already installed on the lot or like use and then install them yourself like from somewhere else like, you know, how does that work?

Rachel: Yeah, I’ve done it a couple of different ways. I don’t necessarily buy new from the manufacturer. Most of my deals are actually used. I try to keep them in the park so that I do business in because I would be bad business. If you want to work in a park and you’re taking their homes out of their park and then they, you know, they’ve got an empty lot. But if I find a home in a park that I really don’t want to do business in a more of a low end or middle of the road, then I will move it to another park that I work with more of a higher end corporate owned park with a space and move it to that location. But when I first started out and what I actually suggest people do is actually leave it in the location just like what Lonnie Scruggs did and what he recommended people do in the beginning because it is costly and there’s a lot of steps when you’re moving mobile homes, so.

Brian: Gotcha. Ok. And are you financing these deals or are you paying cash? How are you paying for these?

Rachel: I’m paying straight out cash. People have asked me like financing. I do know people who’ve taken on partners, or they’ve gotten private money. Lenders, even other investors have actually taken home equity loans out of their homes to buy these deals. I don’t recommend it. So, you know, some other investors, they just partner with a friend, or I mean, but for me personally, I’m fine. I’m financing this just straight-out cash. So, like I said, when I got into a mobile home investing, I had the cash from the sale of my single-family homes to start out with. So then the cash flow, I just keep reinvesting, reinvesting, reinvesting and then if I have some cash that I have to work with like that when I sold, you know, I just told you that I, you know, then I’ll buy the home, you know, or, you know, now I’m thinking about going into lots and land, which is the next thing.

Brian: Parks yourself.

Rachel: Parks, I’ve gotten some people who’ve actually asked me, would you like to partner in a park? And I actually asked Lonnie Scruggs this question, and the reason why he didn’t get into parks was because him and his wife wanted to travel in an RV across America. And he told me, like with the home, because I basically work with people with a homeowner mentality that they eventually want to own the homes. So, the way I set it up is you. They are leasing with an option to purchase these homes versus a straight out rental. And so, I had actually asked Lonnie about that, and he said that’s why he didn’t go into parks, because the parks, he’s like, You’re in a different game. You are in the management game, and there’s more than meets the eye to owning and managing a park. And it’s very expensive for a small-time investor. I know a lot of investors who actually got into parks, then they got out of parks just because, I mean, they were lucky to get out. They spent so much money and it wasn’t worth their time or effort. It just didn’t work out for them. And I talk about this in my podcast, Episode 13 The Truth About Mobile Home Parks If anyone is interested in learning more about mobile home parks, but for me, I’m not getting into that right now. Personally, it’s nothing I want to do. I value freedom and time more than, you know, I want to manage all the time.

Brian: So, well, I’m in. How much are you paying for a typical mobile home? Again, these are the higher end parks I understand. But like, how much are you paying for these?

Rachel: Yes, it would depend on the market. I will tell you my first deal and it was actually in a higher end park. I just got lucky. My first deal, I paid $3600 in cash for the home. It was a two-bedroom, one bath home. This family, they had been living there for 10 years and they just want it out there. Like, you know what, we just want to live in a nicer neighborhood. They actually, I think they went into a single-family home as a rental and went into a different school district. So, this actually was not even advertised. They found me because I had passed out fliers in the park and I actually already talked to the manager. Like, OK, you could do business in there. So, they didn’t even advertise this home. And I had called, and she didn’t even tell me she was like, well, I don’t want to tell you a price over the phone. I just kind of want to meet you. So, we did a negotiating and back and forth back and.

Rachel: For that to make a long story short, I bought it for $3600 cash. They even cleaned it for me. Then in two weeks, I had a nice family in there who paid me a thousand dollars to move into the home and $250 a month for four and a half years. And they were never late. So yeah, so that was my first deal. But typically, it would depend on the market. I’m telling you this is true. I’ve had students. I remember this one student, husband and wife couple. They bought a mobile home in California for $4000 And yes, I’m not kidding. They bought it for $4000 cash, but the lot rent was a thousand a month. And they actually got lucky because they sold it to a family who was in foreclosure on their single-family home, and then they were downsizing, so the deals are there, but I would say that they’re more off market deals to get the best deals like anything you know, out there. So, it would depend on the market.

Brian: But I mean, it’s a pretty hot market out there right now. I mean, what are you paying in 2021 for some of these properties?

Rachel: Yeah, for me, since I work in higher end parks now and then I actually I will not buy a two bedroom. It has to be a three bedroom, two bath, and it has to be usually cosmetic work. So, I’ll pay anywhere between ten and fifteen thousand cash for these homes and then I just fix them up and get cosmetic issues. And then I usually fix them up and then I get families in there and I get anywhere between 500 to $600 a month cash flow and then whatever move and fee that they give with this market, people are like, oh, I’ve got three thousand to move in or four thousand to move in or five thousand a move in. So, it really depends what people have to move in. And then I put them on a lease with an option to purchase. And typically, I put mine usually now for about 15 years, but they want to pay it off sooner. So, if they get this boatload of cash, maybe from their taxes or an inheritance and they can pay it off sooner if they want so.

Brian: Ok, but they are still renting from you with the option to buy the property for whatever the market value is at that time in the future when they’re OK. And so, what kind of return on investment are you seeing on some of these deals?

Rachel: Honestly, I have not actually calculated the return on investment. All I know is I spent like my first day, I spent three thousand six hundred for this. I mean, lot rent is an expense. So, I mean, you got like five or six hundred dollars in a high-end park for lot rent and then that one in California a thousand a month lot rent. So, you really need to fix up these homes. But I’m going to be honest, the return that you get is going to be based on the effort you put into these deals. And I, when I talk effort, I mean, you know, know who you are as a person. Know your skill set and work with the skillset that you have. It would not work for me if I just did direct mail because I’m not an office person. I hate admin work. And I did that when I was in single family homes, making one hundred offers to all these banks. Reo Department. It did not work for me. So, for me, it’s like I just need to be out in the field talking with people. And that’s pretty much how I find these deals. But I mean, the returns, they are high. But I will also tell you there’s the risk that they may not pay and then you’ve got to take back a home.

Rachel: And I’ve done that several times, and I asked Lonnie Scruggs about that. And he’s like, it’s just part of the business that you got to take back these homes. And I’ve been in the court, and I’ve seen the judge and blah blah blah. You know, I have one. It was my nightmare. It was or I call it, the rat house. This lady, she didn’t even tell me, yeah, a lot of when I do take back homes, either they don’t receive the income that they were receiving in the beginning. And if the people were upfront and honest and I don’t have an issue, we just give the keys and then they just move on. But this lady with the rat house, it was one thing after the other, what I found out from the park manager with her and her husband split up. So, it didn’t work out. So, divorce is like one of those big issues why I’ve had to take homes back in the past, and you just take them back and you want to have more winners than losers. And it’s just, you know, part of the business. So.

Brian: And mobile homes, they fall under the same eviction laws as single-family rentals, right?

Rachel: Yeah. As long as you establish and landlord tenant relationship and you have to have that in your paperwork, for me, I’m doing lease with option to purchase. So, I have those separated. I have the lease and then have the option to purchase. You don’t want it all on one agreement. So, if you’re going to be doing it that way, you know, and you want to fall under those laws, you have to show a landlord tenant relationship and actually have them sign another agreement saying, I understand this is a landlord tenant relationship. So, if you want to fall under those rules, otherwise you’re in foreclosure court, you know, if you do it the other way with owner financing.

Brian:  All right. Well, let’s switch gears for a second here. I want to hear your crystal ball for, you know, both where mobile home markets are headed in. 2022, where real estate markets in general are headed. You know what? What do you foresee coming up in the future for this industry?

Rachel: Well, I don’t mean to be political, but you know, there is a big talk about what’s happening in China. This is big with ever grand, and I think it’s really going to affect the real estate market in the United States as well, too, because they have properties all over the world. And also, with the interest rates creeping up, I think we’re going to be entering a bear market maybe sooner than later. And for anyone listening, you know, you hear all these things with the media, but you may not be seeing the whole truth of everything. But this thing with Evergrande is huge. If anyone doesn’t know they’re a real estate developer in China and they, as far as I know, they may be headed into bankruptcy. So, it is a big deal. So right now, if you are a real estate investor, you know, get as much cash as you can because things are going to start as the interest rates creep up. I’ve been through a lot of these ups and downs and yeah, a lot of investors that I know personally who’ve been who have the experience, they’re getting ready. So. Something’s going to happen.

Brian:  All right. Well, so tell us about what you are up to in adventuresinmobilehomes.com You know how people can reach you. You know what, how people can learn more about you and about mobile home investing in general?

Rachel: Sure. Well, I had mentioned I have a podcast on my web. Site Adventuresinmobilehomes.com, so if you’d like to check out the podcast, just go to my website Adventuresinmobilehomes.com I also have a book, and Brian, you can link it up in the notes as well, too. Adventures in mobile homes if anyone wants to check it out. But basically, it’s my experience on me investing and my style and what worked for me and what didn’t work for me. And I will tell you that I did everything that Lonnie Scruggs says to do in his course and in his book. And there were some things that didn’t work for me because it just didn’t work with my personality. So, I talk a lot about it in that book. And then I also have a free training class if anyone’s interested. If you want to link it up in the notes as well to

Brian: Send it out in the comment just now to the free training class.

Rachel: Ok, if anyone is interested in learning more about mobile home investing, you can go to that link and check out the free training class as well too. And other than that, I mean, I’ve just been doing a lot of, you know, podcasting speaking. I just spoke at Pod Fest. So, yeah, I’m all over the internet sphere. I’m also on Twitter at Mobile Home Gurl and Instagram at Mobile Home Gurl, and I have a YouTube channel, Adventures in mobile homes. If anyone wants to kind of follow what I’m doing as an investor, so.

Brian: And that’s gurl spelled with a u, by the way. Yes.

Rachel: Mobile gurl with a u. Yes, exactly.

Brian: Well, Rachel, thank you so, so much for coming in today. I found this fascinating. You know, like I said, I would personally like to diversify my own investments to include some mobile homes. And, you know, I think the listeners out there got a lot. So, thank you so much for your time today and we look forward to having you back in 2022.

Rachel: Ok, great. Well, anytime. Thank you so much, Brian. I really appreciate it.

Brian: All right, guys. We’ll see you next Tuesday at 2:00 p.m. Eastern. And in the meantime, stay in touch. Bye now.

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