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Real Estate Investing School Podcast
135. Masterclass: Manufactured Homes with Jason Velie
01:05:45
Welcome back to the Real Estate Investing School Podcast. In this episode, we have manufactued home master Jason Velie join Joe to take a deep dive into this intriguing niche of real estate that not enough people are talking about. Jason shares...
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- [00:00]
A
Always talk about what you're doing, let your network know what you're doing. Make the Facebook post so people know what you're doing. Because I also now get word of mouth deals.
- [00:14]
B
Welcome to the Real Estate Investing School podcast. I'm your host, Joe Jensen. Our guest today, Jason Vely. Well, Jason, while working a career in finance, began investing in real estate back in October of 2019 with virtually no money to his name until leaving his six figure W2 job only three and a half years later. Now, Jason's portfolio portfolio consists of 59 rental units, 44 by weighted ownership, and 13 active single family flips. With a total equity position of over three and a half million dollars and passive net rental cash flow of over 10,000 per month, Jason's business model from the beginning has been flipping single family homes and including the much overlooked asset class of manufactured homes and holding small commercial multifamily properties. In his free time, Jason enjoys spending time with his wife and four soon to be five children. So sounds like you got your hands full. Welcome to the show, Jason.
- [01:16]
A
Thanks, man. Glad to be here.
- [01:18]
B
Yeah. So to have you here, you're doing a lot of cool stuff. I mean, you've, you've done over 30 deals in just the past four years. And that, that's a lot of action to be taking, you know, we'd love to hear. I think you're doing a lot of things people wish they were doing or want to be doing. So I'm excited. You kind of telling them the path of how it worked out for you.
- [01:43]
A
Yeah, absolutely. So I always, you know, had an interest in real estate, but I thought that I would just continue working my finance career and slowly save up money and buy a rental and then save up more money and buy another. And then maybe when I was, you know, 55, 60 years old, I would have 20 or 30 rentals paid off and be wealthy in retirement. Sure. You know, but then about four and a half years ago or so, somebody that was flipping houses that I met introduced me to a real estate podcast and I started listening to that and it just blew my mind that, you know, particularly learning about hard money lenders and private money lenders, that the fact that if I just find a good enough deal that somebody out there will loan me all the money for, it just blew my mind. And that's kind of what opened, you know, what was possible to me. And so I was crazy enough to do it. And I went out there and I found my first flip and I had no money to my name, but I. Excuse me. I went and found a hard money lender that loaned me 100% of the purchase and the rehab, even though I had no experience and I had to bring eight grand to the table to get it closed for their points and closing costs. So I did a cash advance through my credit card for that and then for the $10,000 rehab budget, I didn't have that money either. So I bought like the five grand worth of materials with the credit card and then didn't pay the contractor until he was finished and the lender released the $10,000 draw to me. So then I was able to pay him off, pay the five grand back off the credit card. And then after we closed on the sale of that flip, you know, paid back the eight, the other eight grand off the credit card. And my net on that first flip, which was a double wide manufactured home by the way, was a little over $26,000. And to me that was, that was proof of concept and I knew I wanted to do more of that. But the progression from there was really slow. You know, like you mentioned, over 30 deals in four years. But truthfully all but maybe three or four of those deals were within only the last two years. It was a really slow start. Between deal one and two took me quite a long time, and then between deal two and three was a little bit less. And then once I got to around deal 4 is really when that exponential growth curve started to, to happen and things really took off.
- [04:45]
B
Yeah, why is that? You know, we see these hockey stickers and you know, like why, why was it for you specifically that it was so slow at the start but then just was able to skyrocket?
- [04:57]
A
Yeah. So I'd say a few things. Number one would be just ignorance and education and learning because you, the more you learn over time, the more specifically with finding more deals, you learn other ways of marketing, other ways of, you know, instead of just only looking for a wholesaler to maybe give you a chance over their other top buyers, you know, you learn how to market yourself, you learn how to start sending direct mail or cold calling, driving for dollars, whatever. And so you're ability to find deals gets better over time. And also really once, once you do a couple of deals, your credibility becomes very, very strong in that. At least in my market that's not huge because everybody and their grandma is talking about doing real estate, wants to do real estate and does all the listens to all the podcasts, takes all this education in, but never does anything with it. So if you're One of the folks that goes to these real estate meetups or is networking with wholesalers in your local, you know, REI Facebook groups. And you're actually doing deals, even if it's only, you've only done one or two so far, but you've closed them, you instantly become more credible. And that's what wholesalers are looking for, people that they can count on to close. And if you become that, over time, the deal flow just becomes easier and easier. And now I'm, you know, four years in, I have, you know, the only small handful of actually consistent wholesalers that know decent numbers in our market. Most of them bring their deals to me first and that's awesome. A lot of the ones that don't, it, maybe they have a buyer that's willing to pay more than me for stick built houses. Those same ones still often bringing me all their manufactured home deals first because their other buyers aren't interested in the manufactured homes. So I still have a lot of opportunity there. So it just gets easier on time. Everything you know, your knowledge base compounds over time. It's like the concept of compounded interest. Your knowledge is the same way, your network is the same way, your credibility is the same way. And that's why too, it's important to always talk about what you're doing, let your network know what you're doing, make the Facebook posts about, oh, just bought this new flip today or just sold this flip today so people know what you're doing. Because I also now get word of mouth deals because people, your friends and your family, your network, they all eventually are going to know somebody, a friend or family member that's going through a divorce or is facing foreclosure or what have you. And that is essentially free marketing, you know, so it all compounds and gets easier over time.
- [08:03]
B
Yeah, I love that concept of compounding effectiveness, compounding credibility. Like you said, that's so cool, you know, and it's, it's really true because so much like I said, there's money out there, there's deals out there, but it's, it's, who can you trust more and more? Especially in this world of like social media outreach, like anybody can meet anybody, you know, I message you and now you're on this thing like we didn't know each other from Adam, you know what I mean? It's like, it's so easy to like get fingers out there in the world now. But the hard thing is like who's, who's legit, you know what I mean? And so if you have somebody in your network that you can, like, see as legit. Boom. That's been so much more than somebody on Facebook who says they're legit, but you don't really know, you know. And so when you can have, like you said in your network, somebody that goes, oh, Jason's the man, maybe he's only done two deals, you know, like now you've done tons. But at the beginning it's like, well, he's done two. That's two more than me. It worked. I'll just go with him because I know him. And then it just builds and builds and builds. So I love that. Compounding credibility. Let's talk a little bit about manufactured homes. So a big thing with man. And I've dabbled in that. I've had my fair share of goods and bads with that. And. And it is a underutilized asset base. But let's talk about financeable. Okay. Because that's kind of a key, key element to, especially in flipping. If you want to move this product after you get it all ready to go, if no one can get a loan to buy it, it's going to be really hard to sell it. So what are the key things that you look for to make sure that it is finance bull on traditional, conventional terms so that people can buy it? Or is that even something you concern yourself with? Or you just look for cash buyers when you flip, flip them? But anyway, I want to talk about the finance ability of manufactured homes.
- [09:53]
A
Absolutely. So first, just to clarify for the listeners, you're referring to finance ability for the buyer that would be buying it as their primary residence after I flip it. And that's important to differentiate because as I'm sure you know, these types of properties don't make a good candidate for the BRRRR model, you know, the buy, rehab, rent, refinance, repeat, you know, if you wanted to potentially keep it as a rental property, because you can't get investment property loans on these conventionally. So what we look. So that's why I only flip them. I don't hold any, you know, as rentals. So to answer your question, what, what makes them financeable is, you know, they need to be. It needs to come with the piece of land that it's sitting on. So can't be, you know, in a mobile home park or on rented land. And. Excuse me. And it needs to be on a permanent foundation, which means that the tongue and axle. Axles have been removed, you know, which of course means the wheels as well. The home is going to Usually be sitting on cinder block piers and we usually have metal straps tie downs as well. And contrary to popular belief, the skirting around the property, the decorative skirting, which goes from, you know, the outside edge of the house from the, from the bottom of the house to the, to the ground, brick skirting is probably the most common. There's also cinder block skirting and there's also even just vinyl skirting. Those, those. The skirting does not support the weight of the building. It's not part of the foundation. And people often confuse that and think that it is part of the foundation, but it's not. And having brick or block skirting is not a qualification. It's not a requirement.
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B
You don't need any skirting, really. Right, like you could finance no skirting.
- [12:03]
A
You do need skirting. But. Okay, but, but vinyl is sufficient that you have to have skirting just so, you know, you keep rodents and stuff out. But vinyl is completely sufficient. And, and I've seen so many investors and even realtors that think that vinyl skirting will disqualify it from financing. And like when we lit, when we have one that has vinyl skirting that we flip and we relist for sale, there are so many buyer's agents that won't make an offer or they put in comments or something that says my buyer wouldn't be able to buy it because it wouldn't qualify for financing because the vinyl skirting, and that's just not true. They just don't know.
- [12:46]
B
As long as it's got that permanent foundation right, then as long as there's some skirting, you'll be fine. The permanent foundations, the bigger part than the skirting. Now, is it true that it needs to be a double wide as it can't be single wide?
- [13:01]
A
No, it can absolutely be a single wide. Okay. Single wides are exactly the same way. So what, what's supposed to happen? The way that the title search works whenever you go into escrow is that you get the, the data plate from inside the home. Single wide or double wide. And it's a regular full size sheet of paper that's going to be glued onto usually the inside of a kitchen cabinet under the sink, or might be on the wall inside of a bedroom closet. And it has the manufacturer, make and model serial number. Or if it's a single wide, it'll be probably a VIN number, just like a vehicle. Well, single wides and double wides are considered mobile homes. They're considered vehicles until they're put on a permanent foundation. And then what's supposed to happen whenever they're put on a permanent foundation is whoever puts it on that foundation, which is often the manufacturer of that, you know, home, like, you know, Clayton Homes or Oakwood Homes, what have you. What they're supposed to do when they do that is they're supposed to cancel the title that is in place with the dmv. So there's no longer an active title. And at least where I'm at in North Carolina, they're supposed to file a form called a Declaration of Intent to Affix to Real Property, or formally called Affidavit of Affixation, which is basically just you indicating to the county, this property has now. It's no longer a mobile home. The title has been canceled with the dmv, and it's now affixed to the property and now considered real property. And thus you, as the county, are now allowed to tax this property, tax the building as real property, instead of only taxing the land, you know, for the sake of property taxes. But what you find oftentimes, whenever you're buying these is that whoever set this up on a permanent foundation 20 or 30 years ago didn't have that stuff done. So you have to make sure that your attorney knows what they're doing, which is why it's important for you to know a little bit about what you're doing. Because I've had a situation where an attorney just assumed I was just buying land. They didn't even know there was a building on there that could have burned me, but luckily it didn't. So you need to make sure that your attorney is taking that information from that data plate and making sure that there's not an active title with the DMV and making sure that that form has been recorded with the county. And if that's not the case, if the form hasn't been filed and if there is an active title, those are pretty easy things to fix. You know, you can cancel the title pretty easily. They can have the seller sign that form with the county and record it right before they record the new deed at closing. So they're easy fixes as long as you have the data plate. Where you run into an issue is if that stuff hasn't been done in the past and there's no data plate on site because maybe it was in a kitchen cabinet and somebody remodeled and replaced the kitchen cabinets and didn't keep that. There are ways around that to still get the data plate. There's a. There's a HUD label on the. The back side of the siding on the back of the house, if they haven't replaced the siding, that there's a website you can go to that you can type in that HUD label and they're able to generate a new data plate for you and send it to you for a couple hundred bucks. So that's one workaround. There's also on some trailers on the. On the actual I beam frame, on the side where the tongue was in between the frame and the skirting. Etched into the frame might be the VIN number, but if you have brick or block skirting there, you only have a couple of inches of space to see. So you might need to get like a little remote camera to look up there to try to get it. And sometimes it's not there and you can't do it. And if there's no prior documentation with the county or the deed or anything that has the manufacturer information, there's no data plate, there's no HUD label, you can't find anything. You're really out of luck. It's not financeable.
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B
Yeah.
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A
The other thing that's really important to mention on financeability is the age of the home.
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B
Yes.
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A
So HUD did not start regulating these until 1976. Prior to that, anything, any trailers older than 76 are not going to be financeable. You know, conventional. And we said. When we say conventional, of course, we're talking about regular conventional mortgages, FHA, USDA, VA, all of these single wides and double wides can qualify for any of those types of loan products as a primary residence as long as these other qualifications are met. But now, even though they are financeable from 1976 forward, I will say that a lot of lenders are leery to finance something quite that old. Most lenders I've talked to have, have claimed that they won't finance them if they're over 20 years old. But every single one of them breaks that rule all the time. And what I've seen is anything 1990 or newer has no issues at all with getting financing on the back end as primary residence. Anytime you get older, like, you know, 76 to 90, that's when you start to start to have some issues where the lenders being a little more, you know, scrupulous that they may scrutinize the things a little bit more, and they might want to, you know, ask if a porch has been permitted or if the structure has been changed or if a property's ever been moved. And if a property has been moved from one permanent foundation to A different location on a permanent foundation that technically disqualifies it from all of those financing options. Except for VA financing. VA financing is only. Yeah, VA financing will still approve financing if it's been moved, but only once. If it's been moved more than once. VA disqualifies as well. Now the little.
- [19:28]
B
I didn't know that part because I ran into an issue with that once. I was just new into real estate and I tried to figure out all these different things, okay, permanent foundation this and that. And I put all this money in, bought it, and then I was going to try to sell it or refinance it. And they're like, oh, but this is. It's been moved. This isn't its original location. And I was like, yeah, what does that matter? And that blew up the whole thing. But maybe there's still a trick I can use because I still have that property with the VA thing. So I didn't know that. But yeah, that's a key thing that I learned the hard way is it needs to be its original location. It can't have been moved from two to three different places to still get traditional financing, which we say traditional financing, which is really like the main way to finance it because you're not going to get, you know, DSCR loans on this. Investment loans like lenders don't want to touch them. You know, the best thing you could hopefully get is maybe some land loan just based off of the land that it's on. But you know, traditional financing is really the go to with these. And if you botch that by one of these things. So let's go. I'm going to run through these and you can see if we need to add anything to it. Permanent foundation after 76, but really after 90 would be better. Single or double wide is okay, but if you need the HUD label and data plate on owned land in Oklahoma, they call it de titled is what you were describing. Where there's no longer a title, you've made it a real property and it needs to be its first location, except for the exception of they're doing a VA and it's been moved once. Did we miss anything? Anything more we need to add to make sure that the places qualifies for financing?
- [21:12]
A
That's. That's pretty much it. I mean, the one thing I'll say you don't. If you have the data plate, you don't necessarily have to have the HUD label. The. The HUD label isn't really needed unless the data plate is missing and you need another way to try to find that information.
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B
Cool.
- [21:32]
A
I like another.
- [21:33]
B
And for those listening, this is vital information. Like I said, I learned I the wrong way. I spent a lot of money that is still tied up in projects that I thought I was just playing it safe, buying some cheap mobile homes, not going to cost too much. And. And I didn't know arief detail this. So if you ever want to play in this world, this is like a masterclass. Jason's giving us, like, saving you tens of hundreds of hours and tens of thousands of dollars. So anyway, go on. You're saying something I interrupted.
- [22:02]
A
Yeah, yeah. So another important thing to look for just when you're doing your due diligence on these is to know that these manufactured homes that were made in the late 80s through the early 90s, almost all of them were made with polybutylene plumbing. And the way to recognize that when you're walking through a property is just look under the. The kitchen and bathroom vanities, the sinks, and look at the water supply lines that are coming out of the floor or out of the walls. And if those supply lines are a gray color, there's a really strong probability that it's polybutylene plumbing. And that was. That type of plumbing was banned at some point because they realize that with a little bit of age, that plumbing becomes incredibly brittle and causes a lot of leaks. And every time we buy a property that has that type of plumbing, there's always a few leaks underneath. And you can try to play whack a mole and fix those little leaks, but chances are just by touching it, you're going to cause three more leaks. And home inspectors know this. So if you just repair a couple of leaks and then go to resell it, which is okay, you don't necessarily have to re plumb it, the inspector is going to blow you up on that, and the seller's going to want to. The buyer is going to want you to replumb it anyway. So just factor that into your rehab budget. If you see that gray piping coming out of the wall. And for reference, you know, in the area that I'm in, you know, retail plumbers, to re plumb a whole double wide are going to charge somewhere around six grand. I've got some cheaper plumbers that will do it for around three grand. Just to give you an idea of what that normally costs. But that's one of those bigger expenses that if you know what to look for and budget for on the front end, it saves you from cutting that out. Of your bottom line on the back end.
- [24:16]
B
Yeah, that's huge. Because plumbing issues with mobile homes are a huge headache. So. So you'll still flip that. You just replace the whole plumbing system and you count that in before you tie anything down.
- [24:29]
A
Yeah, absolutely.
- [24:30]
B
So if guys, if it's gray, it can't stay, okay? That's the rule. If you go look at the plumbing and if it's gray, it can't stay. And you're gonna have three to six thousand dollars of extra rehab costs on top of whatever else you're doing. So tell us some of the advantages of why even flip mobile homes or manufactured homes or trailers, whatever the heck we want to call them. Why? And maybe we could talk about if there's a difference between any of those terms. Because, you know, modular, manufactured, trailer, mobile. But, but why, why flip those as opposed to a normal stick built? And what have been the pros and cons of that?
- [25:10]
A
Yeah, so a couple of the, you know, the most obvious reason that you know, would be a benefit is the lower cost, the lower barrier to entry, little bit lower risk because of the lower costs associated. So, you know, if you were doing your first flip or two and you were a little nervous about, you know, you don't want to go and get a hard money loan for a $500,000 house, but you might be comfortable getting a hard money loan to flip a, you know, $150,000, you know, single wide. You know, that that's one advantage. They are also very easy to work on because they're on a crawl space. All of the, the plumbing is very easily accessible. I mean, like I said, I can get a double wide re plumbed for three grand. You know, how much is that going to cost to replumb a stick built house? God forbid, especially if it's on a slab, then you're really talking huge money, you know, so that's another benefit. But I would say more than anything, you know, and this is going to depend on, on your market. But you know, at least in my market, there's just a lot of opportunity. There's a lot of manufactured homes around here that are, you know, 15 to 30 years old. A lot of those neighborhoods that were set up with, you know, quarter acre to half acre lots, you know, with, you know, one manufactured home on each lot. And most investors don't want to touch them because they either are afraid of those few little like title nuances, which honestly we pretty much just went over all of them. If you know, those handful of things for the most Part you're going to be safe, you know, but then if.
- [27:01]
B
You don't, you could get burned, though. And that's the thing is it does. That's what I was saying emphasize from like, guys, this is a masterclass. Jason's saying this like, oh, it's no big deal. It's like, but it scared off, which is great, you know, it's scared off dozens and tons of investors. Could people like, oh, I don't know about this thing. I don't know about that. Those are a lot of little nuances that either people have been burned on or they know someone's been burned on. It's like, I'm just going to steer clear. But if you listen what Jason's saying, you learn these little nuances, it opens up a whole new, much lower barrier entry world that you can play in. Because it's not complicated if you know it and if it's not, if you don't know it, though, like everything else, it's like, ah, you can really get burned. And so anyway, I just want to emphasize, like, you're, you're saying it so nonchalant, but like, those are, those are key things to learn that, like I said, they're not difficult to deal with if you know what to look for. So go back and relisten to that list I just said and write that down. Like, hey, if we do xyz, you know, we'll be good.
- [27:56]
A
Yeah, no, I appreciate you giving me the opportunity to get into the weeds on that a little bit because I'm going to save the copy of this video as a resource to give people when they ask me about this, because I've had other podcasts where I've been able to get into some of this, but not quite to that level, and it'll be really helpful. But the one other thing I do want to add as far as the benefit and as far as less competition goes, is that that's probably the biggest benefit. There's a lot of opportunity because there's a lot less competition. And some of that does come from what you mentioned about the potential risks. But more often than not, what I have found is that most real estate investors, even a lot of the ones in my market that have been doing it for decades, don't know that these homes will. Can qualify for regular financing on the back end when you resell it. They think that I'm going to have to sell it, you know, a single wide on land that I might be able to sell for $160,000. They might be thinking that I'm going to have to sell that to a cash buyer for $70,000 just because they don't know that it's financeable. Which, and if it's not obvious for the listeners, the fact that it's financable as a primary residence is what makes it so valuable. Because the older trailers, the 1975 trailer, even if it's beautiful and remodeled and new siding and everything, even if it looks brand new, it can't qualify for financing. Whereas if it could qualify for financing and it might be $160,000 property, you're looking at maybe an $80,000 property in my market.
- [30:01]
B
Yeah, yeah. And that's the thing. And that's where guys go to like, oh, now we're going to sell or finance it, we're going to carry the note and you know, do like a rent to own and stuff like that. Which, which is fine if you got it cheap enough, but if you're in it, a bunch of money, plus a bunch of money for rehab, you know, especially if you got hard money and you know, private money you can't hold on to. It's like it just doesn't make sense to have that kind of money tied up long term on some seller finance. You know, if you're, you know, selling it on seller finance, it's just. But if you can get it financeable, then the world opens up to it. It's way more buyers, way more flexibility, way more options and like you said, a much higher sales price because they can come in with a low bared entry like say a VA loan. They can come with zero down on a very low mortgage as opposed to having to come up with a hundred thousand dollars cash. Like it's just, it's not very plausible. Most people that was cash aren't going to be buying a mobile home. You know what I mean? So let's talk a little bit mobile, modular, manufactured trailer. Is there any difference?
- [31:09]
A
Yeah, yeah. So I would say trailer and mobile home, I would say synonymous mobile versus manufactured. I consider that just to be the difference between whenever it's mobile to when you put it on a permanent foundation. And some of this is a little bit arbitrary, but that, that's my opinion is that once you have put it on a permanent foundation, it is technically no longer mobile. So either that's, that's when I consider it a manufactured home. At that point, some people may still call it true mobile home, a manufactured home, just because they don't like the, the, the, the verbiage of mobile Home or trailer because it doesn't sound as nice or whatever. Modular is different. Modular is so. Well, first I'll say manufactured homes, single wides and double wides, they are built entirely off site and single wides just in one section. Double wides are built in two different sections and then delivered in two pieces and connected on site. But they are built with like a giant steel I beam underneath, you know, each of those one or two sections. Modular is a little bit different, which I suppose a modular could have a steel beam underneath the foundation, but I don't think they normally do. Modulars are built in sections and they are delivered to site and they're assembled on site in various different sections instead of just one or two pieces connecting together there. You know, you might have like all of the walls assembled in a, you know, in a warehouse or all of the, the ceiling, you know, trusses or whatever. Built off site and then assembled on site. So it's not like a, it's not like a modular isn't like a true stick built home where you're building every single part of it from scratch on site. However, modular is still in the eyes of, and this wasn't the case some 10 years ago or so, but luckily it has changed in recent years. Modular as far as home values go and as far as how an appraiser views and appraises homes, modulars are now viewed as equivalent quality construction type as a stick built home, whereas manufactured home, mobile home is not, they're not viewed the same. You can't use, you can't use a stick built home as a comp for manufactured home or vice versa. But now you can absolutely use modular home as a comp for stick built and vice versa.
- [34:12]
B
So if someone's buying a modular home, they, they can look at it just like a stick built. They don't have to worry about everything. We just listed with permanent foundations and D titles and, and you know, you know, you know, seeing like data plates and all that stuff. None of that applies to a modular home.
- [34:31]
A
For the most part. Yes, a modular may still come with a data plate, but not always. It depends.
- [34:45]
B
Obviously needs a permanent foundation needs to be like a strong. I mean it would have to have a permanent foundation. That's how they build them. Correct.
- [34:53]
A
Yeah, yeah. But a modular will, a modular may have a data plate but it probably never had a title.
- [35:01]
B
But that's because it was never mobile. It was never like it could be like looked at as a vehicle.
- [35:06]
A
Right. That's just, that's definitely something you would Want to make sure your closing attorney knows what they're doing so they make sure the title work is good. And of course, obviously you want to make sure you have title insurance on any property that you buy. And you know that'll help, that'll help protect you as well. But you know, if you're getting a loan, if you're getting a hard money loan on these, they're going to make sure a title search has been done and you have title insurance on the property. And most hard money lenders and private lenders don't lend on these because they don't like the risk involved or they don't, they don't like the concept or risk that if you do poorly or stop paying and they have to take the property back, then they're stuck with the manufactured home on their books that then they have to offload, you know, so a lot of them don't touch them. But you know, don't believe the fact, don't believe when people tell you you can't get a hard money loan or private loan on manufactured homes. That's absolutely not true. They just haven't made enough phone calls. And, and I heard somewhere somebody said that the best lender is the next lender. And you know, it's true that, I.
- [36:18]
B
Mean, it's so true.
- [36:19]
A
If I'm looking for a good lending option for something, whether it's, you know, additional private lenders for flip projects or cash out refinance on an apartment building, I will go online, I'll get referrals from other people I know or brokers. But I'll go online and look through forums and stuff and Google searches and I'll make a list of 20 or 30 lenders and I'll call every single one of them and find out what the products are, if they can even do that, if that area is too rural for them or not. You know what their terms look like. Write everything down, cross them out if they're not a potential fit. And then if they are a potential fit, I'll write down what their terms look like and compare them and go from there. So don't ever limit yourself or think that, you know, you don't have options because they're out there.
- [37:13]
B
Yeah, I've had that experience. I'll talk to a dozen lenders and everybody's no, no, no, no. And then I'll come across one that's like, yeah, we could do it if we do X, Y, Z and like, okay, like, yeah, you can't, you can't take it off face value, you hit on something I wanted to mention. Rural. Let's dive into that a little bit. Does it matter how rural the location is for these homes? Because I know for investment lenders it matters a lot for, not just for mobile homes, but for any type of DSCR investment loan. A lot of them don't want to play in the rural areas, these really small towns. Does that matter for traditional financing on these homes?
- [37:54]
A
No. For traditional financing, it actually may be even better because a lot of rural areas qualify for USDA financing, which is also 0% down. But unlike with VA, you don't have to be military to qualify, you know, whereas your metro area and suburbs and whatnot, those are not going to qualify for USDA loans. So you probably have even more potential lending options in the rural space when it comes to that. Whereas like you said, like, you know, with my commercial apartments, those types of lenders absolutely care about, you know, population and, you know, those type of demographics.
- [38:42]
B
Yeah, man, that, that's, that's huge. So, real quick, one last piece on the modular. Can you give us an example of what a modular home is? Ver versus a mobile home? Like, if someone saw one or was thinking of buying one, how would they know it's modular? Do they seem the same? Or they're like, are they totally different? And where do like barn dominiums and those type of structures fit into all this?
- [39:02]
A
Yeah, so it, it absolutely can be hard to tell sometimes. So because they do make modular homes that are shaped exactly like double wides. So you very well might look at a home and say, oh, that's a double wide. But then you find out that it's actually a modular. And so I usually, in that, in that case, I usually assume it's a double W unless the, if the owner tells me that it's modular, or if I can see from, you know, a prior listing of that property that it was listed as modular, then I might peek my head under the crawl space and look at it. And if I don't see the big metal I beams going across the, you know, underneath the floor joists, then I assume that they probably are correct that it is modular. But there are modulars that. Because modulars can be completely customized. So a perfect example, I live in a modular home that is two stories and 3,400 square feet with six bedrooms. You know, if you were looking at that house from the road, you would never think that that's a modular home. But it is. There are, there are companies that manufacture homes like these and they'll build them in, you know, four or six or eight sections and they may have additional add ons that you can pay extra money to get another, you know, section of a house added on, you know, another bedroom or what have you. And so in cases like that it's, it's not super easy to tell from the outside you. But, but most of the time, not always most of the time the prior listing description or category categorization of how it was previously listed is usually going to be accurate. Not always, but most of the time.
- [41:06]
B
So where do barndominiums tiny homes, these shipping container homes, are these all modular homes and are they financeable? Like in my. I didn't think like you could get financing on like a shipping container tiny home thing, but maybe I'm wrong. Where do those like where do barn dominiums and, and, and shipping container and tiny homes fit into this stuff?
- [41:29]
A
Tiny homes are, they're, they're a little bit unique because they're just like a single Y trailer in the sense that they're mobile. Typically they're usually on a trailer but they are. Tiny homes are not yet regulated by hud so they can't approve for those types of financing. I do know somebody that in my area that owns a business that manufactures tiny homes and they have recently partnered with a lender that will lend for the buyers of these homes in a non traditional type of loan product. But for traditional financing. I don't think you're going to get them with the container home stuff. I don't think you're going to get it unless there's a way for you to do it as a new build and be able to do it in a way that everything meets code and you're just using those shells as the, the walls instead of two by fours potentially. That could be financeable as a, as.
- [42:42]
B
A stick built but not something you've experienced.
- [42:45]
A
Yeah, I've not done it. And what was the other one you said?
- [42:51]
B
Oh, the barn, Barn dominiums.
- [42:55]
A
Is, aren't. Isn't that just like a style of build?
- [43:01]
B
Yeah, I'm not really sure. I mean I've heard a little bit about them. They kind of come in, they sound kind of like this modular thing where they come in and they kind of build it on site a little bit. But a lot of times they'll have like pre factored parts of it it seems. I don't honestly don't know a ton about them but I've had some people ask me about them and I've wondered about the finance ability of them. Because you can make these pretty large homes kind of like what you were describing with your place. So you can get like really custom and pretty large. And I'm like, what's the difference between that and stick build? I don't really know.
- [43:32]
A
Yeah, I think that would qualify as modular if it's you know, built off site and pieces and you know, put together on site. But I know, I know I do know somebody that's built like a barndominium style house completely from scratch, like a stick built home. Okay. So I wouldn't, I wouldn't look at that style of home and just assume that it's modular, but it absolutely could be.
- [44:03]
B
So let's lock a little bit about your home. So you said it's like, you know, it's large, 3,500 square foot, six bedrooms, but it's a modular home. Did you have it built or did you find it or what's the story behind that? And you know that I think that's kind of cool to hear.
- [44:18]
A
Yeah, no, I, I found was on market and everything else I do is strictly off market. But this was a primary residence and terribly listed, terrible photos, everything. Desperate sellers. And we got a great deal on it and it was listed, it was actually listed incorrectly as a stick built house and it should have been listed as a modular. And so I thought, and you wouldn't know looking at the house and the structure unless you saw that data plate. There's no way you would know because the house is built like a tank. I mean it's 2 by 6 studs, 12 inch on center, very thick walls. I mean it is solid. And it wasn't until the appraisal came back that I learned that it was modular. Because the appraisal came back and it said construction type modular. Because mind you, also I bought this home near the very beginning of my real estate investing journey. So I didn't know much about it.
- [45:31]
B
Well, you didn't know everything you know now.
- [45:33]
A
Yeah, right. But it was already an existing home. It was 16 years old when we bought it. And yeah, it was when the appraisal came back and I saw that the construction type was listed as modular. That's when I realized that it was a modular home. But that's also when I realized that the appraiser did not give any type of price adjustment for that construction type as compared to the stick built comps that he used.
- [46:06]
B
Yeah, so that's what's going to ask. Didn't matter if it's modular. I mean if you can qualify for the same financing if it's modular as stick built, like does it even matter if his modular versus stick built at all? Like it's going to be treated the same, it'll be appraised the same, the comps will be the same, the financing's the same, it really doesn't matter. So the Keith, you know, for listeners, if you go find what somebody thinks is a manufactured home but it's actually a modular home, that could open up a lot of doors that they might not see the value in because they think oh it's manufactured, it might qualify for xyz.
- [46:41]
A
Yes. No, that's a good point. So in that example that I gave earlier of like, you know, a single.
- [46:46]
B
To some look exactly like it. Yeah.
- [46:49]
A
Right. Well let's say, let's say you have a you know, double wide for on land for you know, $200,000. Well if that, if you buy it and it's actually a modular and you didn't know it, it's viewed as a stick built house. You might be able to sell that for 260 now because it's a stick built house instead of a, you know, manufactured home that you thought, yeah, that's.
- [47:17]
B
Awesome dude, this, this is good. I don't know if I mean obviously you've done so many things besides just you know, flipping mobile homes. You know, you've used that and leveraged that to buying tons of multifamily stuff. We don't have time to go into everything. Might need to have you come back on. But I appreciate you diving into this and maybe I'm just being self sexy because I've dealt with some of this. I'm like man, what are the intricacies? Because I learned the hard way on son of it. But I do think it's an untapped market. That is really cool. Like I said the barrier to entry is lower for a lot of people and that they can come in with cheaper rehabs, cheaper, you know, you know, purchase prices and things like that that it's like. And a lot of people just discredit them. And I do, I know I've had phases my career where I just, I'm done with those and I just don't even look at them, you know, so there's less competition. I did want to ask you before we dive into our final four questions on our lead out, I wanted to ask you a little bit about weighted ownership. In your bio we talked about how they're you know, 44 of your 59 units are weighted ownership. Can you explain what that is and how that's advantageous to you?
- [48:25]
A
Yes, thank you for asking. Because what really frustrates me in the real estate world is the education world, all the gurus out there is when you have these, it's not all of them, but oftentimes apartment syndicators that might own 3% ownership of, you know, 1200 apartment doors, which is great. That's still way more than most people in America. But they will go around all over social media saying they own 1200 doors, just like. No, like, be like, if you want to say, I have 1200 doors under management, you know, that's fine. Or I'm. I'm a general partner on 1200 doors. That's more transparent, that's more honest, you know, But I just. I mean, I don't care, like, what people want to do for the sake of ego. That's their business. But I just don't like it in the sense of if you're trying to. If you're misleading anybody for the sake of education or selling something, making it to try to look something better than it is, that's where it bothers me. So all that being said of those 59 doors, which actually it's going to be 60 now because we're. We're in the process of changing one big unit into two smaller units.
- [49:56]
B
Oh, nice.
- [49:57]
A
So those 60 doors are made up of four different complexes. An eight unit that I own completely by myself, a 16 unit that I own completely by myself,. Another 16 unit that I have a 50, 50 partner with, and a 20 unit that I own 65% of and have a 35% partner up. So obviously, for those where I have a 50% partner and a 35% partner, I don't own that entire 16 and 20 units, you know, so it's not fair or accurate for me to say I own 60 rental doors when I don't, you know, by ownership percentage, I only own 45 of those 60 doors. And I just. I'm a huge advocate for transparency in this space and setting realistic expectations with people.
- [50:57]
B
I love that. I think it does such a disservice to everybody when people try to fluff things because it adds confusion. These deals you have, these weighted ownership. Are these, like, joint ventures then, or any of them syndications?
- [51:13]
A
Yeah. So the 8 unit and the 16 unit that I own by myself are obviously just, you know, by myself.
- [51:20]
B
Yeah, yeah, you just have those ones.
- [51:22]
A
The 16 unit, that's 50. 50. That's just a joint venture between me.
- [51:28]
B
The two of you?
- [51:28]
A
Yeah, yeah, me and a good friend of mine that is actually a wholesaler, that he found the deal and then we went 50, 50 on the down payment. That one we actually got seller financed with absurdly ridiculous terms.
- [51:42]
B
And that's all.
- [51:44]
A
See, the 20 unit, that's 65, 35 is just a separate LLC that's a joint venture with me, and that same guy is the same partner on that one.
- [51:57]
B
So love it.
- [51:58]
A
For two of the complexes, no partners. For those other two partial partners. And for my house flipping business, I own that entirely on my own. No partners, no employees, no investors, just private lenders and contractors. And I have property managers for all of the apartments too. So I don't have to. I don't have to take my time managing all that.
- [52:24]
B
That's key. No, that. And that's awesome. And one thing, you know, I'm the same way. I have a big aversion to people just fluffing like, oh, I own 1200 doors. And it's like, just call it what it is. But another thing it does is it discourages some people because they're like, oh, that's 1200 doors. Like, how. How's that possible? Like, explain how it's possible because you're a 3% owner in a syndication. Like, that's cool. Like, like advertise that so other people can do that same thing and not make you think you're something that you're not. But, you know, so I love that you're so transparent with that. But that, that's super cool and very impressive. And again, it's. It's like, oh, well, how did Jason get to 59 doors? It's like, well, he got to 59 units because he did a couple creative joint ventures. Oh, that's an option for me to get there. You know what I mean? Like, it's like, it's an education and it's an inspiration to learn how you really did it. So I appreciate you pointing that out in your bio so that we could actually dive into it. So this is great, man. There's so much to cover. Obviously, we can't cover everything. This has been a master class on mobile home stuff, which will be priceless to those that want to dabble in that space. We're going to roll into our final four questions, but is there any. Anything else you wanted to share for the listeners? And what's a good way for people to reach out to you, follow you, be inspired by you, maybe partner with you, you know, lend you money for, you know, Whatever. Where they can, you know, be a part of what you're doing. How would they get in touch and follow you?
- [53:57]
A
Yeah, yeah, I appreciate it. You can, if you just want to stay up to date on what I'm doing and maybe occasionally learn a thing or two, you can follow me on Instagram if you had any interest in partnering, whether that means being a private lender, on flips that are collateralized by the properties or potentially equity partner in future multifamily deals. If I, you know, come across a big enough deal where I need more equity partners, if any of that interests you, you can go to JV with JV.com and submit your information in there, and then I'll get back to you.
- [54:42]
B
I love that URL, by the way. Hello. Joint venture with Jason.
- [54:45]
A
I just bought it with JV a couple weeks ago.
- [54:48]
B
Yeah, that's money. JV with jv. I was like, I like that. All right, sweet, man. We're gonna roll into our final four questions and then we'll let you go. What is a dream dill or deal you would hope to be able to tackle someday?
- [55:10]
A
I. I think the. The next thing that I would like to do is if. If I could find, you know, something much larger, like a great deal on say, like a 60 or 80 unit property that is preferably within a couple hours of where I live, that needs a lot of work, maybe every unit needs to be renovated. You know, I've got the construction teams that can handle that, that type of thing. You know, if I could get some great deal where I, you know, wouldn't need to raise much capital and if any, depending on my liquidity at the time, and then have huge upside in the value add, I think that would be fun also. More so just because the sake that I would like to have one. I think I live near the beach. If I could eventually come across a great deal on a beach house nearby that either good enough deal that I could burr and hold onto it, or a great seller financing deal, you know, lower down payment or great terms, something like that. I've come pretty close to a few of those deals, but some reason or another, they never came to fruition. But yeah, truthfully, I'm not somebody that I don't have these huge goals and aspirations to take over the world, you know. Yeah, I'm about to fun growth. I'm about light growth, not burdensome growth. And to me, if. If I come across something that I don't like to do, I immediately find a way to not have to do it anymore. Because I love that. Because if I don't, it's gonna wear me down. It's gonna burn me out. And these past four years I've just been having fun. I've had the time of my life doing this and having a blast. And if I do that, or if I set these specific goals or if I do what everybody else says I should do and wake up at 4:30am and do a cold plunge and do CrossFit and set all these KPIs for myself that I force myself to track every day, I would be miserable. That's just not the right lifestyle for me. And I just form my business and my growth slowly and progressively at a pace that's fun and manageable for me while still allowing me to, for the sake of my family, to never have to work evenings or weekends.
- [57:58]
B
Well, that's something so awesome about real estate is you can customize it to your preferred lifestyle. And I love that you're like, I'm not going to get too carried away to when I don't enjoy my life. The whole point is to enjoy my life. And so I'm going to design it around the systems that I'm getting what I need. But I'm still enjoying my life. So I love that concept. All right, Jason, what is one of the most pivotal books you've ever read?
- [58:28]
A
Outside of the Bible, of course. I would say the Go Giver by Bob Berg. It's not real estate book, it's, it's. I guess it is a business book. But the, it's a very short book, quick, easy read, but it tells a, a fictional story that is fun to read but the concepts in it are just really about having an abundance mentality rather than a scarcity mindset and helping people out. And instead of being a go getter, being a go giver and the concept of how the more you help people and the more you give, the more just naturally comes back to you without having to try. And that's been so incredibly true in my experience that I help as much as I can and give as much as I can and it just comes back.
- [59:41]
B
I love that. Yeah, that's a gem. I love that. Thanks for the recommendation. All right, question number three, Jason, what's one of the most expensive or interesting mistakes you've made in real estate investing?
- [59:56]
A
That would be the first house that I tried to buy as a rental. Well, I bought it, but I wanted it to be a rental. I didn't know what I was looking at construction wise. I didn't know how to inspect a home. I thought I was safe because I hired a property inspector. But I was an idiot and hired the cheapest cut rate, flat rate home inspector that only charged $300 per inspection regardless of the size of the home. And he missed everything that he should have found. He missed that there was mold all inside of the kitchen cabinets and it was rotting out. And he missed that the entire roof had to be replaced and that the floor joists were eaten up with termites. And then to, you know, add to that punishment, that first contractor that I tried out ended up ripping me off for a total of 16 grand. So between those two things, I ended up the way I bought it. So. So I took a 401k loan to get 15% down to do a 15% down investment property loan. So it was a super cheap house, like 60 grand. So my mortgage pit, I was only 350 bucks a month. So I knew I could cover that if I had to if anything went wrong. And I'm glad I did because I did have to cover that for quite a while. And I held that and paid that mortgage on a vacant home for about two years until I finally had enough money to put into it to fix it the rest of the way to get it sold. And I should have lost. I should have netted a loss on that. But because as we know, real estate is forgiving with time. Over those two years, the value of that property went up from somewhere around 90,000 to, you know, around 121, 25. So really, the market helped save me from losing money. And at the end of the day, after all that, I probably came somewhere to around break even.
- [62:07]
B
Yeah. Which is so crazy, even holding it for two years, like once you're able to sell, you still recoup, you know, all or most, if not even a little bit of profit, you know, which again, like I said, real estate can be so forgiving in so many ways because so many things went wrong there. But like, you didn't lose your shirt on it, you know, which is so cool because a lot of other business ventures, if things go south, like you're done, you know, you buy a stock that the big company goes out of business, like it's worth zero now. Bye, bye. You know, there's nothing you can't wait two years and then get it out, you know, successfully. So that's super cool.
- [62:42]
A
But I could have, and I think that's.
- [62:45]
B
You could have.
- [62:46]
A
I think that's why it's important to note that I planned for that ahead of time, that if everything went wrong, I would be able to float that mortgage payment, you know, so that my family was protected. And I think that's important for, you know, the listeners to keep in mind that you're getting into your first deal. First of all, take somebody experience with you to walk the property. Take somebody like me. Don't just do it by yourself. But secondly, make sure that you're looking at worst case scenario, can you float the bill if you have to to be safe and if you can't, then don't do it.
- [63:25]
B
Absolutely. I love that. And one of my number one rules of real estate investing is don't lose your assets. You know, like, we want to collect as many assets as we can, but don't lose them. So you got to look at these ways of, you know, what's your exit strategy? How could you be burned? Can you hold it long enough like you don't want to be forced to fire sell something? And that's how you lose money. And then at the end of the day, you also don't have the asset to grow your portfolio and hit your goals, you know, So. I love it, man. All right, well, we'll let you go. We have one last question. You know, give us your thoughts on the purpose of life and then we'll let you out of here.
- [64:00]
A
Oh, man, what a question.
- [64:03]
B
It's just an easy, you know, base hit at the end.
- [64:06]
A
No, for me, I'm a man of faith and, you know, my entire, well, not entire, but my, my personal calling in life is to. To be successful in business so that I can be radically generous. And, you know, one of my favorite verses is Second Corinthians 9:11, that it says something to the extent of, you will be enriched so that you can be generous on every occasion so that your generosity will result in thanksgiving to God. And I find it a huge blessing to be in a position where I am able to be a blessing to others and to be used to be an answer to prayer rather than just saying that I'll pray for them. And as much fun and joy as I get out of real estate investing, and I love it with everything in me, it doesn't even hold a candle to the joy that comes with being able to give generously and impact people, you know, when it's put on your heart to do so.
- [65:17]
B
That's awesome, man. Thanks for sharing that. And you've given generously on this podcast. I'm excited for this one. I took more notes on this than I typically do. Learned a lot. So I appreciate your time and for being on the show.
- [65:29]
A
Absolutely, man. Thanks for having me. It was a blast.
- [65:31]
B
Yeah. This is Joe Jensen signing off for the Real Estate Investing School podcast, reminding you to get creative, be smart, make some moves.