Robert Leonard  01:08

Before we dive into the whole world of mobile home investing, tell us a bit about yourself and how you got to where you are today.

John Fedro  01:15

A lot of mistakes. Mistakes and hard work. I got started a long time ago. I can’t believe that time has gone by this fast. I sort of failed into mobile homes. I’ll freely admit that. I mean, I’m glad I failed into them, but I didn’t want anything to do with these. I never lived in a mobile home. I didn’t know you could invest in these. My first mobile home was a mobile home in a park.

I’ll tell you a quick little story. I had a course. There was a course that I had on a friend’s bookshelf. I picked it up, and it was like a get rich quick kind of thing overnight, and I read it. I believed, “I can do this! This is great!” I was working a mundane job and knew that there was so much more I could do. I had this fire in me, and I had all this potential, but I didn’t want to go to school. I didn’t want to wait years to start my career and then work my way up.

So, when I saw this book on real estate investing, I’m said, “This is what I want.” I read the book a couple of times on a weekend. It was more of a binder course, and I did everything that it asked me to do. I spent my small life savings of a few thousand dollars at the time knocking on doors and sending out letters. This was in Florida, in the Tampa Bay area where, at the time, you could make money just cleaning a window and reselling it, and I wasn’t doing anything. After three months, I still didn’t do any deals even if I was really busting my butt.

I was young and probably looked like I was 15, but I was really putting in a lot of effort. I went through my money, and somebody had called me for my very first deal. It was a mobile home. She wanted $8,000. I didn’t know it was a mobile home. I was too green to even ask that. I was thinking, “$8,000 for a three-bedroom? It must be my lucky day or something!” So, I just drove there, to a park.

I zigzagged through the park, and I realized it’s a community. As I was pulling into her home driveway, I got waves of emotion and I felt sick. I threw up on the side of the road. Luckily, I opened my door. I looked at myself in the mirror after, panicking, “What should I do? Should I run away?” But I ended up going into the home, which became the first deal. She was asking $8,000.

Remember, I spent my life savings. I was working at an Alltel store at the time, and doing valet cars, and I didn’t just didn’t have any money, so I negotiated. I talked to her. There were issues with the home, so we went from $8,000 down to $3,000, and in a couple of hours, I legitimately didn’t have that $3,000. I paid her 10 monthly payments, starting with the first month, of $300 a month. I made that deal work, and it opened my eyes, but I was embarrassed.

When I first got started in this business, in my first year, I had 14 deals, but it took me months and months to actually tell other investors what I was doing because I was embarrassed about it. Nowadays, if you say you’re a mobile home investor, it’s like a cool thing. “Whoa, you’re hipster!” But back then, I thought I was going to be laughed at. But people really didn’t. People responded, “Oh! Here. I don’t want these. You do something with them. I’ve been throwing these away.”

I guess back then, I started with mobile homes. I failed into mobile homes and purchased some inside of a park, some on their own little private land, and then I usually sell them on payments. I rent out some, but I usually sell them on payments on myself for cash. That’s what I’ve been doing for about 18 years. Three years ago, I got started buying the entire parks. I kind of graduated up to that level. It took me long enough, but that’s what I’m doing. I added that into my what I’m doing now. So I’m kind of doing in-parks, on-land, the whole parks, and it’s just mobile homes. I was embarrassed. Now, I love them.

Robert Leonard  04:47

Are you doing anything other than mobile homes or mobile home parks?

John Fedro  04:51

Some of my portfolio is on single-family homes. I got rid of any multifamily that I have besides my parks. Whenever I’ve gone away from mobile homes, and I’ve been doing this for 18 years. I’ve done different things with single-family homes or I’ve gone after like hurricanes. I’ve chased doing properties there. But whenever I deviate from mobile homes, I get my hand slapped. I lose money. I lose credit. When I just follow trends and get greedy about something because people are making money over there, and I decide to try despite knowing nothing about it, that’s when I’ve gotten burned. I say ‘burned’, but I put myself in those situations. Those are when I got lessons. So yeah, most of my portfolio now, and most of everything I’m looking at, is either a mobile home in a park, on land, or it’s the entire park.

Robert Leonard  05:42

Just to your point, that’s exactly the shiny object syndrome, right? As entrepreneurs, we get lured into all of these different shiny objects, whether it’s real estate or stock investing or side hustles. You get pulled in the direction of whatever the newest shiniest thing is. You’re a successful investor, and it even happened to you. It happens to everybody.

So, if you’re a new investor listening to the show today, don’t be discouraged because you want to go after all these things. But listen also to what John is saying, how he’s focused on mobile homes, and he’s done really, really well, and when he deviates from that, he has trouble.

Talk to us a bit about what your personal portfolio looks like today. We just talked about what types of properties are in it. How many units are there?

John Fedro  06:20

I don’t know how many deals I’ve done in the past. I’ve been doing this for 18 years. My portfolio now is mostly mobile homes, either in people’s parks, in my own parks, or on private pieces of land. Sometimes, I’m also working with other folks around the country. Most of what I do is selling on payments. I am dabbling more with renting some mobile homes out in certain situations, but mostly everything is selling on payments. Technically, for a lot of these properties, I’m just a note holder. I’m the bank. I don’t do repairs. People can still work with me and call me. I poke folks to talk to me. But technically, I’m not owning a lot of these homes that I have.

Robert Leonard  07:03

Why are you deciding to do that strategy? Why are you essentially seller financing these properties to get rid of them instead of renting them out or just flipping them?

John Fedro  07:13

For me, even when I got started back when I was telling you that story, selling on payments, once I learned that was actually a thing when I was reading that get rich quick book, I decided, “Oh my god! You can do that.” That excited me. Getting rich quick, making $40,000 here, and $20,000 there was awesome. One needs to do that every so often to keep moving forward in investing, but that wasn’t exciting to me.

I think, in my DNA, I wanted cash flow to put my feet up, and keep getting money every month. For me, I was always looking for that. But now is different than 18 years ago. 18 years ago, I had to sell more homes for cash. I wasn’t making as much money. If I sold a home for cash, I might only make $20,000. If I sell it on payments, I can sell the same home for $30,000, plus maybe an interest rate. But I want to make more money, and I’m willing to wait, so, nowadays, I sell mostly on payment because I can afford it. I want to make the most money. Sometimes, I get those properties back, and I can resell them.

I’m selling them to good people. I’m solving a need, and really like putting good people in these homes. I’m also changing their lives. They wouldn’t have lived here or gone to school or owned something if I didn’t help them. I’m not saying that to give myself a pat on my back or anything, but I’m just saying that it’s cool. It’s amazing to actually help people that don’t have $20,000 to $40,000 to actually pay you cash or don’t want to go to the bank or can’t.

So, in the beginning, I was selling more for cash because I had to. Now, I’m selling more on payments because I want to.

Also, when you’re talking about mobile homes in parks, so many people want to make payments. Somebody has $5,000 down, $10,000 down, $2,000 down, etc. There are a lot of those people, but there are only a limited amount of folks with a cap of $20,000, $30,000, $40,000. They’re out there, but they are fewer and far between. So, it’s a combination of I had to sell them, wanted to sell them that way, and needed to sell them that way. I was able to tax time or at different times of the year. You’re able to sell homes quickly for cash. If it’s a double-wide, 3/2, you might sell it quickly for cash. So it’s kind of juggling, especially in the beginning. Which one are you going to sell for cash? Which can you sell for cash? Because I don’t want to run out of money. I don’t want other people to run out of money.

Robert Leonard  09:31

What are the terms look like when you sell a property to somebody using seller financing?

John Fedro  09:37

When you say seller financing, in my mind, it’s a specific thing. You’re selling the home. You’ve sold the title, the deed. You’re creating a note, a mortgage, or a deed of trust. You have a loan originator, and you’re becoming the bank. Now, you can also sell the home without owner financing. You could sell it with the lease with an option, or maybe a rent credit where you’re keeping ownership, and then selling the ownership at the end. You hold on to the title until the very end. I just wanted to sort of make that mention of owner-financing versus selling it with like a lease option. Either way, though, you’re still looking for the same buyer. You’re still looking for the same person that wants to pay you off. They don’t want you there anymore. They want to pay you 5 or 10 years of payments, and they’re happy to actually own something.

Robert Leonard  10:23

So, which of those are you doing?

John Fedro  10:24

Oh, both. It depends. It depends on the park. It depends on if I own the land. It depends on if the park will let me do it and what the park will let me do. But for all of the above, the paperwork has to be correct, mind you. Of course. Some parks want you to sell the home and they want to see that the person in the home is on the title or deed if you’re in New Hampshire or Rhode Island, while in other parks they say, “No, we don’t care. You can rent it. You can sell it how you want.” So it kind of depends on the park. It depends on how much money I’m getting down. I’ll transfer the title earlier if I’m getting like 25% or more down. 

Either way, you want the same person, whether you’re owner-financing it, or you’re selling it on payments, or some other way. It’s all just semantics. The paperwork is different, but ultimately, you’re looking for that same person. An ethical person, with the ability to pay. They’re not flaky and jumped through all your hoops. They’re appreciative and know this needle in a haystack opportunity that they’re getting. And again, they want to pay you off. They want to give you enough payment, so you are eventually gone. So, we do thorough background checks, and we get down a couple of thousand dollars, usually between $2,000 to $8,000, depending on the home and the condition in the area, and then we’re selling on payments.

At the beginning of my career, I was younger. I didn’t know what I was doing, and I would just put anybody into my property without background checks. “If you have money, I want you to be here.”  I was selling my homes for way too much money. I was gouging people in prices, the interest rate was admittedly probably too high, and I was setting people up for failure. So, I was selling homes that way, and people right now that are not ethical, or just want to sell it for whatever they want to sell it for can really set people up for failure. You can overprice homes and get wrong people into these properties that you know won’t afford it.

Could you “sell it” for $50,000? Yeah, but is that person actually going to pay you? They might stay there a few years and give you a few thousands down, then flake out, and you’ll have to sell it again. Some people want to do that business to screw people over, and then there are other people like me. Once I learned what I was doing, I didn’t want to get those properties back. I wanted to deal with people that wanted to pay me off and be in a win-win situation.

Now, we’re selling for at least 5 to 10 years’ worth of payments if it’s in a par. We want to get all our money back in 6 to 12 months and make $300 cash flow. We want to disclose everything and treat the buyers and the sellers right.

I definitely went off of your question, but I hope that paints a little bit of a picture.

Robert Leonard  13:07

Yeah, that’s great. So what are the typical prices that you’re selling these properties at? I mentioned this before we started recording the show, but the mobile home investing space is a place that I want to get into myself. I’ve been looking at them, and you can see nice renovated mobile homes in the New England area, where I live, upwards of $100,000 or more. I’ve seen them reach $120,000, and then you see some that are around $20,000-$30,000. Of course, they’re not the same quality. They need some repairs, maintenance, and things like that, so that makes sense. But where are you targeting that sales price? It sounds like maybe you could get $70,000 for a property, but you’re choosing to do $50,000 or $60,000, so you have a higher quality buyer. Is that the case?

John Fedro  13:47

No, I don’t want to make it sound like that. We’re not leaving money on the table necessarily. We’re not gouging people. If we’re taking payments, we’re selling for a high retail price and that’s because we’re taking payments, and we’re taking the risk.  We are selling on payments for a high retail price, that’s on the selling side. I think you were mentioning on the buying side, as an investor. You’re seeing locally. Just like people around the country, if you live in a metro market, you can probably find a mobile home, whether it’s from the ’80s, ’90s, 2000s, or newer, you can probably find some mobile homes going for $60,000-$120,000.

In some areas, there are more parks than others. But some parks command the value. They have active comps. “In this year alone, we sold 12 properties like this, and they go quick.” And so, you’re absolutely right, and there’s no way for me to say that isn’t the case. But first of all, there are so many communities out there, and whenever I work with folks, we really want to get clarity of the market. I don’t just want the folks listening to this podcast to go on Facebook or Craigslist and see everything selling for $40,000. For this piece of junk, $20,000. That isn’t gonna work here because yes, the stuff online, which you’re seeing, people can get some of those prices. Sometimes they can, and sometimes they can’t. Now, does that mean those are bad deals? Maybe. Maybe not. Does it mean you can afford those? Maybe. Maybe not. Is that something you’d probably want to do for your first deal? Definitely, probably not.

Now, when you have clarity on the market, and you know what people are selling for, you’re right that some people are patient. If you’re seeing a home for sale for $60,000 or $80,000 or $100,000 or $200,000, if it’s in a park, those sellers have time to sell. I mean, obviously, they have time. They know their home is worth money, and they’re patient. They want to get what they want to get. 

Other times, when we deal with mobile homes in parks, a number of the folks that we’re dealing with as mobile home investors live paycheck-to-paycheck, and that’s neither good nor bad. They’re probably people around the country. Whether you live in a mobile home or not, you might be living paycheck-to-paycheck, and it’s indicative of people that we help. People can’t always pay their bills. They mismanaged finances or there’s deferred maintenance or there are title problems or ownership issues or their home has to be moved, and nobody can get approved by the park as the park selling it. The list goes on.

I don’t want you buying that $100,000 home unless you’re sure it’s maybe worth $200,000, and for some reason, you can pick it up for $100,000, which isn’t realistic. I don’t want you buying the homes that are $40,000, $60,000, or $100,000. For the folks that I work with, even in the New England area, the coastal areas, and the main metro populated areas, those are not the properties I want them buying. I want them buying from folks that are in some type of typical hardship. We have to act quickly, usually. We’re usually making cash offers and payment offers, helping people more than just buy their home. They have title problems and need help moving into another home.

I definitely agree with you that there are those higher-priced homes, but we just really make a reputation for ourselves. This is just me telling this to you because you haven’t seen it yet, but some people get themselves into trouble. We can go on about why people do and how they get into it, but yeah. There are those people that need to sell quickly, and those are the people we help. We typically don’t help as many of those people that are asking $100,000 or $60,000 as much.

Robert Leonard  17:18

I want to dive into your buying process, your buying criteria, and how you find those deals. But before we do, because we were talking about that rent-to-own or seller-financing piece, I want to talk a little bit more about the terms of those deals. You mentioned $2,000 to $8,000 or $9,000 down. What does that look like on a percentage basis of the property they’re buying? Maybe it’s a $50,000 property. What are you requiring for a down payment on that? Are you requiring 20%, as a traditional bank would? Are you looking at a different percentage? And then, what are you charging for interest rates? What are you doing for terms? I think you’ve said five or 10 years. What does that look like?

John Fedro  17:53

If you’re selling on payments, I suppose it depends on how much money you need to get back, and how quickly, because if, you know, “Okay, I just spent my last $10,000 or however much I needed getting into this property I’m sitting on, I have no money.” Now, you basically are sort of backed into a corner where you have to sell for cash. You don’t have to, but you should unless you’re just going to wait until your next deal. But yeah, get that cashback and reinvest it.

Sometimes, selling on payments isn’t the right way to go. Now, I say that because I want to get people that have money down. If you have money down, it shows you have a savings account. You’re able to save money, able to work and put money away, and you really want this home. You’re willing to put down money, but I will sell homes that are beautiful. I’ll also sell homes that are handyman specials.

I know how much money I have into each deal, and it’s a spectrum. If I’m going to sell a home for $50,000. Let’s say we’re just talking about a 2-bedroom, 2-bath home in some random part. You can sell that for cash for maybe, $10,000. Just to make it easy, you can sell it on payments for $20,000 or probably even $30,000, or still $10,000. As an investor, you’re the captain. You can decide how much you want to sell this for.

Like I mentioned, I was gouging people in the beginning. I was selling overpriced with higher interest than I should have. Nowadays, I don’t charge any interest for a mobile home in a park. On land, I do. But in parks, I don’t. Nowadays, there’s nothing inherently wrong with that. I just don’t do that. But I want to say that, you know, the way I’m selling it is I try to sell for at least five years’ worth of payments for $300 a month of cash flow minimum for five years, and I want to make all my money back in a year or less. Five years at $300 a month is $18,000 without any interest, plus a small down payment, so the minimum we’re selling most of our homes for is that.

But now, there might be some questions. “How much of a down?” Well, I don’t want to leave money under the table. “Can we get more than $300 a month?” How much more? “Can we sell it for more than 60 months?” Well, how much more? “Is there a buyer that will pay $100 for 10 years worth of payments?”Yes, but how flaky are they? Are they just coming to our property because they can’t go anywhere else? Are we gouging people in prices and the only people that are willing to go into our properties are risky people that can’t go anywhere else? Or are we selling for a decent amount with a low amount down?

I wanted to focus first that there is a spectrum. We can overprice people, and sell overpriced homes and sell to risky people, or we can sell for less money, and give people a better deal. We sell for about 5-10 years worth of payments. Where else are people going to buy a home, pay 10 years’ worth of rent or less, and actually own something? It really depends on how aggressive or how picky you want to be. You might sell your home and think, “I want to get $5,000 down.” But then someone comes to you with $3,500. You can negotiate and say, “Okay, $3,500 moves you in, but for the first year, you pay me an extra $150 a month, and that makes up for it.”

More importantly, one of the last things I’ll say about this, even if we’ll talk more, obviously, is that the one thing that threads all my people together, and this is very important, I will take zero down on a home. I mean, it’s got to be really got to be like a big handyman special, but I’ll take zero down. I don’t want to, but I will. The thing that threads my people together now, versus 10 years ago or more is that they’re humble, appreciative, sincere, and they’ve jumped through all my hoops. They’re appreciative of this needle-in-a-haystack opportunity that they’re buying on payments to get into a decent home. Plus, they have a job, and since they’ve worked for the last couple of years, they can show income.

It’s not so much of a downpayment. Like I have to get this or I have to do that. I know, as an investor, I’m making my money over the long run. I do want to make it back quickly, but I also care about the person I’m putting in. What’s their situation? I don’t want to follow my heart. I’ve been burned to do that too much. But I do care about the person. I want to set them up for success. So, it’s kind of it depends. The answer is, “It depends.” But I do want to make my money back in a year or less. That’s what we shoot for.

Robert Leonard  22:13

You mentioned that you do 0%. Why is that?

John Fedro  22:16

I do that most of the time. For a mobile home on land, I always charge interest. For a mobile home in parks, I’ve stopped charging interest most of the time. The reason is that I found that I can increase the price, and I can tell people, “I’m not charging interest.” I’ve turned a negative into a positive because people like that. Yeah, I increased the price, but everything’s going towards the principal. There’s no fine print. I’m making it easy for myself. I don’t have to give people a 1098 at the end of the year for the mortgage interest. My accounting’s easier. It’s simpler for them, and most of the time, I’m making the same. It’s easier. That’s why I started doing it. Also, I was gouging people before, and I didn’t feel right, but ultimately, I didn’t notice a change. It’s easier for people to understand. People liked it, and they still do. But sometimes, I do charge interest if I’m having trouble selling because the price appears to be high, which isn’t usually the case. But if that does happen, I’ll lower the price, and then just put an interest rate of 7%-10% on, and it gets me back to the price I want. I can advertise it lower.

Robert Leonard  23:20

So do you calculate this way? “In over 5 or 10 years, this is what I would earn in interest if I charged my target interest rate, so instead of charging that as interest, I’ll tack that amount on to the selling price and then go to 0%” I know this might be an interesting analogy, but I know car dealerships do that a lot. They’ll charge zero percent interest, but increase the price of the car so that they can claim 0%, so I’m curious. Is that the same thing you’re doing with your mobile homes?

John Fedro  23:43

If not more? Yep.

Robert Leonard  23:45

Very interesting. Where is your actual cash flow coming from? Is it basically that you bought the property in cash, so you have no debt service costs or anything like that? And so, everything you’re getting in payment from that person is essentially cashflow minus maintenance repairs, capex, and things like that?

John Fedro  24:02

Yes, 15% to 25% of the time, we’re buying on payments, as well. Sometimes, there will be a debt service, or maybe you’re borrowing the money hypothetically from somebody. But I’d say about 20% of the time, we are purchasing with payments. Not every seller can take payments, but some do, and we can steer sellers towards payments sometimes. But no, you’re correct. After we make back our initial investment, it’s a profit, and then we can get the home back, and we can resell it again occasionally.

Robert Leonard  24:34

You also mentioned that you’re selling some properties for as low as $18,000-$20,000. How do you buy properties below that price, renovate them, fix them up, and then sell them for those dollar amounts, and still make money?

John Fedro  24:47

Well, you bring up the question. If you can’t do that, do you just not do the deal? If we have to buy it for, let’s say we’re talking about one of those more higher-end parks where it does command a higher price home for people with money, so that you can sell it for a much higher downpayment and for 10 years or more. You can certainly get into those other-priced home. I don’t definitely don’t want it, and that’s something you should do. If the numbers make sense, you might not be making your money back in a year. It might take two years to get your money back. But do you have another eight years of cash flow after that? It will still make sense.

Going back to your question about the minimum deal we do is five years, that’s not exactly correct, because you have some buyers that say, “Listen, I don’t want to pay you for the next five years. I’ll give you $600 a month, and let’s just get this done a lot sooner.” Or “I’ll give you $1,000 a month, and let’s get this done real soon.” We do have some people that don’t want to do that. If we’re selling like an old 1970-something, which is okay, but we’re selling that as a handyman special. We know we’re probably not going to get five years of payments on it.

I don’t want to say, “You have to sell it for this long.” We just have to be realistic about what we can sell it for. I wanted to bring that up first. But to make the numbers work, you have to know what you can sell it for first. You have to know what buyers are paying, for cash, what they have paid, what they’re willing to pay, and then you can sort of work backward. “This is how much buyers are paying. These are how much repairs the home needs. These are all the other numbers that may go into the deal. What can I buy it at? What’s the maximum dollar amount that I can get my money back in a year?” And then, “Okay, well, the seller isn’t anywhere close to that price. Do I just walk away? Do I stand firm? Do I negotiate and become emotional and keep working my way up, and then lose profit and have my margins go down? Or do I go to the next park?”

You have easily over 100 parks. There are probably over 250 parks, within a 50-mile radius. So, nobody listening to this podcast should go out to their first or second or fifth or tenth park and buy their first home. You should have a lot more clarity. You need to really understand who’s out there. What are they selling? Why are they selling? Let’s make offers to most of those people, and move forward with the path of least resistance. How am I going to make my money back quicker? What repairs are going into these homes? Yes, this guy over here is fairly motivated, but these two people over here give a way better and quicker deal.

Robert Leonard  27:12

Yeah, absolutely. If you’re flipping a mobile home, or even just renting one out, and it’s in a park that you don’t own, what do you do if the park owners deny entry to their park to the people that are trying to buy your home?

John Fedro  27:25

My first thought is to find out why that is because you and the owner or manager should be on the same page and wavelength. It should not be a surprise about why you’re there, or this shouldn’t be, like at the last minute, “Oh, that’s weird that they’re stopping people.” You should understand, hey, what’s the deal? Maybe those people were driving too fast or swearing to the security guard or maybe there’s a valid reason. Now, if they’re being malicious or two-face or they said that they were cool with you but now they’re not all of a sudden, that’s a different story. And so, as the title owner, or as the mobile homeowner, you can pull out of there if you want to. We will try to reason with the park. They don’t want the home removed, typically. They want us to keep paying lot rent. We’re going to take it in like steps, but that’s the sort of the starting process of it. Then depending on what they say, we will go kind of escalate the situation. If you have like a specific example, I’d love to kind of play that out, but that doesn’t happen.

Robert Leonard  28:20

You mentioned a lot rent. Is the tenant or the buyer of your property paying a lot rent directly to the mobile home park? Or are they paying you the full amount, both what they owe you as well as the park, and then you make that payment?

John Fedro  28:32

Almost everyone is paying me at least for the first two years, and I’ll explain why. But for the first two years, I want them paying me, and then I will divvy up the lot rent, payment to me, and any late fees. But I trust myself to pay the lot rent, and if I don’t get their payment in time, I’m still making that lot rent payment. One of the reasons we’re there, and the managers want to deal with us, is because we make their life easier. You’re not going to have to think of payment coming to you every month, and we can call the manager up and say, “Hey, Pam, did you get my check? And since we’re talking, how are you doing? Are you feeling okay with this virus? Do you have anything else for sale? Is anybody in trouble?” It gives you another reason to talk to the manager, but I trust me more than I trust my buyers, even though I trust my buyers because we’ve gotten burned by letting people pay themselves.

Robert Leonard  29:22

That’s interesting. Of course, you have far more mobile home experience than I do, but the little bit that I’ve learned, and after I’ve talked to you, I’ve heard that, oftentimes, mobile home parks don’t want the payment from the buyer of the property. They want whoever owns the title, whoever actually is the owner of that property, to make that lot rent payment.

John Fedro  29:22

Now, I will say that in maybe 5% of parks or less, the owner or the manager of the park will say, “Hey, it’s cool what you’re doing, but the only thing that we’re putting our foot down is, that person in your home, the payments have to come from them.” Most parks don’t care. The payment can come from wherever, as long as it’s a good payment. But some parks, which are few, they are a vast, vast minority, will say, “No, we actually care. It has to come from the people inside.” In that case, I do things differently. But normally I’m taking full payment for two years to make sure they’re on time, and they’re good payers. Then after two years, I send people a letter. “Congratulations! you are one step closer to home. In your home, now you have the luxury of making two payments. One to me or my company, and one to the park.”

That’s not a deal-breaker either way. I’d have to say that it’s good that we’re talking about this. We don’t want to make skinny deals. We don’t want to make rash decisions, dumb decisions, but we can always still be proactive and eager and hungry and open-minded. My attitude when I’m dealing with the park is “Okay, park. You say, ‘Jump!’ And I’ll say, ‘How high?’ I want to work with you. I’m willing to jump through your hoops.” It doesn’t mean I’m going to overpay or do anything stupid, but if the park wants me to do that, we’ll figure it out. That’d be ridiculous if I just kill the deal because of that reason.

Robert Leonard  31:03

Do you charge a premium on top of their rent when you have to be the one to make the payment? 

John Fedro  31:09

That’s a good idea, but no I don’t.

Robert Leonard  31:11

You could squeeze out some extra margin there.

John Fedro  31:13

Well, you’re right. There are a couple of things I do to squeeze out a little bit of extra margin. I don’t know, the people in my homes, I get attached to some of them. They’re good people. I know I shouldn’t do this. And no, I don’t care about that, or I just never thought of that, to be honest with you. But that is an interesting service. We’ll do it for you for an extra couple of dollars. It would add up. I mean, it would definitely add up.

Robert Leonard  31:34

Yeah, and maybe not even necessarily as like a service fee, but just to say, “This is the lot rent. It’s this much.” But you know that it’s $50 less than what you’re telling them, and then you can squeeze out that extra profit. But to your point, I would probably tend to agree that that’s not worth it. Even if it’s it’s probably not going to be much, you could probably get $25 or $50 or $100 more, but is it really worth it? The lot rent isn’t a secret. Those people are probably going to find out what a lot renders, and if they end up finding out that you’re charging them a premium, that’s probably going to tarnish the relationship a little bit, I’d assume.

John Fedro  32:06

Typically. Yeah, it does. And $10 to some folks is more than $10 to other folks. Also, in this business, you really get humbled, and maybe you stay humble, or maybe it’s in your personality. But this business sort of humbles you. You’re dealing with people that are working so that we don’t have to. I mean, I want to set my people up for success. I want good people.

Robert Leonard  32:28

So are mobile homes a good alternative for new investors to get started? Or might it be better for them to start off the more traditional property first?

John Fedro  32:37

There are so many ways that people can make money in real estate. Multifamily, single-family strategies, niches, sub-niches. It’s interesting. Even with mobile homes, there are sub-niches within mobile home investing. But that’s not right for everybody. I mean, for some people, if you don’t want to get started with mobile homes, you might want to get started with a mobile home park, or you might feel comfortable doing something else.

I’d say it’s more of the local supply and demand. What you want to start getting into, what excites you, what you’re maybe passionate about, and what’s realistic. How much capital do you have? How much knowledge do you have? Mobile homes in parks, and on private land, do offer something, currently, and this may change in the future, but currently, they do offer pros and cons. We can get into these properties for not that much money. There’s not too much competition. We’re dealing with people that need our help. On the buying side, when we’re buying these homes, they’re struggling. When we sell homes, we’re selling to good, hard-working people, as well. And just seeing that struggle, and helping people, it’s really cool. It kind of keeps you humbled and grounded in this business.

Robert Leonard  33:38

Of course, it’s gonna vary significantly for every property where you’re buying things like that, but just in general, when you say you’re getting into these properties for less money, what are you able to acquire a property at for a price? And then, generally, what does it cost to renovate it? What are your all-in costs for a typical property so that someone who’s new to investing can try to get a gauge as to whether this might be possible for them? And then, also maybe talk to us about how you’re funding them. Are you able to use some bank financing if they don’t have all of the money that they need to buy in cash? What does that whole process look like?

John Fedro  34:10

Across the country, in every state, we are purchasing homes. The acquisition costs, the holding costs, the repairs, the labor, the marketing, when we sell it, in all states, we are purchasing properties all in under $10,000. That covers acquisition, holding, labor, material, etc. We’re selling it, and we want to get all our money back, like I said, in 6 to 12 months or less, with $300 minimum cash flow, for five years minimum when we sell it. That’s for every state. Now, is that in your backyard? Is that like next door? Maybe not. You might have to drive 20 or 30 miles to get to certain areas, to get to those lower-priced homes, or to find a home that’s currently available right now. And that’s a snapshot in time. Next week, there’ll be new sellers, and in the week after that, and the month after that.

Around the country, we’re definitely buying them in all in under $10,000, but does that mean that’s only what we’re doing? No, you can be all-in for under $20,000, and maybe that’s a home you can sell for cash and double your money, or it’s a home you can sell with FHA or conventional finance, or you get a bigger down payment and you make your money back in 18-20 months. I will say this. If you’re over $10,000, I want you to sell the home typically for more than five years’ worth of payments. If you’re into a home for $10,000, and that might not sound like a lot to a lot of people, but for a mobile home, that’s a lot. If you’re into it for more than $10,000, I usually want you to sell for 8 to 10 years’ worth of payments because it’s a nicer home. We paid more for it. We have more into it. You have under $20,000 into it, and even if you have more than $20,000, there are some people I work with on the coastal areas that buy homes. They fix them up and spend $50,000 into them, and they’re selling for $80,000 or $100,000 in cash or bank financing.

If you’re ever into a home that’s more than $20,000, in my opinion, get out of it. Sell it for cash, unless you can get a big fat downpayment and get all your money back still in a year. If you’re over $20,000, get your money back out. Also, ideally, you shouldn’t be over $20,000 on a junky older home that you can only sell on payments. Mobile homes are forgiving, but to the people listening to this, don’t just go out there and buy. If you talk the person down from $40,000 down to $20,000, you might think you’re the best negotiator ever, but that’s not necessarily the case. We really have to be crystal clear on what you can resell before you make any offers to buy anything. Those are the numbers. In every state, under $10,000, and then it kind of goes up from there.

Robert Leonard  36:34

If you could see my face right now as we’re recording this, you would see that I had a surprised look on my face when you said all-in for under $10,000 because I find that to be very interesting. I want to know, how are you able to find those deals? Are they off-market? Do you have relationships with the mobile home park owners, so you’re able to get those properties that way? Are you buying them off the MLS or something similar? How are you able to acquire a property for that little price, and renovate it, because I’m assuming you have to buy the property for maybe $2,000 to $3,000, or maybe $4,000, and then put $6,000 or %7,000 into it for renovations. Maybe less, but something along those lines. So, how are you finding properties for that cheap?

John Fedro  37:09

I laugh because you were saying that you find it interesting. Be real. You say I’m lying. You can just tell me the truth.

Robert Leonard  37:16

I’ve followed your material, I know what you’ve done, so I 100% believe you, but it blows my mind because again, we talked about this a little bit before the show, I’ve been talking to some people in the mobile home park space. For the last few months, I’ve been trying to get involved in it. I’ve been looking, not super diligently, but I can’t find anything anywhere near that price in my area. So I’m curious, how are you able to do that?

John Fedro  37:37

The first one is sort of mentioned. You know the job of a wholesaler. If you’re a wholesaler, your job is to find good deals, and that’s where you lock in your profit. You found it first or you negotiated it, and you got that contract first. That’s where a wholesaler locks in their profit. I say that because you’re getting kind of a clear picture of the market. I mentioned earlier that I don’t just want people going to Facebook or Craigslist, and seeing, “Okay, well, these are who I can choose from. I mean, I guess out of all these people, I’m going to go with this person and this person and this person.” It’s absolutely what you said. It’s a relationship with other investors relations, talking to people, and following up. It’s a combination of all that. It’s not those prices. If people have time, and they’re patient, and they’re asking a retail price, there are a lot of those folks out there. Of course, a lot of people will go through their lives and never need the help of an investor in just in general cars, homes, whatever. But some people do for a variety of reasons. Some people are more logical, and some people are less logical or more emotional.

So, to answer your question, it’s not just one thing that we do to advertise our market. When I work with folks, we really try hard to dominate the local market. I want people to know who you are, and for you to have relationships with enough people so that you have sort of a spider web across a 50-mile radius of where you are. If you have this big spider web where you know what’s going on, you have relationships out there. It takes a while. I’ve seen it take around 9 to 10 months if you’re doing things daily. For the first 9 or 10 months, you’re making most of the call. It’s you doing the work because no one really knows who you are nor what you do. After 9-11 months, now we’ll start to see more people who know who you are. They know what you do. You have more of a reputation. We’re not doing every deal. We’re only doing the deals that are quite profitable, so you learn more about your market. You learn more about your numbers, so you can start brokering homes, and wholesaling homes, as well.

You also mentioned something I wanted to talk about. I’m glad you brought this back up. You mentioned about fixing the homes up. You assume that we’re buying the home for $2,000 or $3,000, putting $6,000 to $8,000 in it, and selling it. By the way, $6,000 to $8,000, for a mobile home, goes a long way depending on who you have repairing it. They could be just screwing you with the price, but $6,000 to $8,000 should go a long way in a mobile home. Anyway, we are not always fixing these homes up to the nines. We’re not always selling homes for the top dollar that we can get down. Even if I sell a “handyman special”, and it may or may not be a handyman special, it’s very livable, or maybe it’s not as livable. But, when you sell a home on payments, even if you don’t disclose everything, but you should, you don’t have to fix these homes up to the nines. 

I’ve learned over the last 18 years that certain repairs make the bulk of society turn around and run the other way. They don’t want any part of those repairs. Mold, soft spots, bugs, gross smells. Most of society is not going to be cool with that. But if it’s more like paint or fresh carpets, or like the home looks used or lived in, let’s face it. That’s fine. So you don’t have to put as many repairs in, but you do have to fix certain things. It also depends on if you’re selling on payments or cash. If you sell for cash, you want to fix it up nicer. But if you’re selling on payments, you don’t have to fix everything up that you think that you would. We don’t have to get these to a “rent ready” level. It can be below that.

Robert Leonard  41:17

So, because you’re able to buy these properties for such a small dollar amount, are they older properties, typically?

John Fedro  41:23

Yes, we are absolutely purchasing homes newer from the 2000s, but I will say, the bulk of our properties are from the ’90s, ’80s, and early 2000s. But, absolutely, those from the ’70s have nothing wrong with them. I’ve been through homes from the 2000s that look way worse than homes from the ’70s. It’s how you take care of it. Even the ’60s can be good, but then again, the homes are smaller and narrower. You can only sell them for a finite amount. Some things change, but I’m open to any age unless I have to move it. Then I’m a little pickier. But yeah to answer your question, the ’90s, ’80s, early 2000s, and ’70s are cool, too.

Robert Leonard  42:03

It sounds like you can pick most ages, as long as the numbers make sense and the bones of the property are pretty good. But it looks like you’ll probably want to be in the ’90s, 2000s if you can. If not, ’80s is okay. And then you can even go down to the ’70s if you have to find a deal. Do you agree with that?

John Fedro  42:19

I would. There are things to look out for. There are pros and cons, but you’re dealing with the home. It’s the roof, the walls, the plumbing, the electrical, the HVAC, potentially, and all the other systems. Also, it’s not just the home. It’s the park, the location, the time of the year, and the application process. But with the homes, you’re correct.

Robert Leonard  42:40

If someone new to real estate does decide to get into mobile homes, whether because they want to get into it with the less initial capital, or they really enjoy our conversation and they think that this is a great way for them to start, or maybe just a completely different reason, what are some of the most important things for them to look out for in their first deal? What do new mobile home investors often miss?

John Fedro  43:02

I would say, if I’m going to categorize these, I’ll say quickly that there are four umbrella categories where untrained mobile home investors make mistakes. This is for mobile homes in parks. There are four umbrella areas. First, you could have overpaid for the home, which means you just paid too much. It might still be profitable, but how long is it going to take to get your money back? Second, you put too many repairs into the home, which is sort of the same problem. You have too much money overall into the home. By ‘too much’, well, how much is too much money? In my opinion, it’s determined by how long is it going to take you to get that money back. Because I want you to get it back in a year or less. So, people put too much money into the home.

The third umbrella area where people make mistakes is that they don’t sell it for enough. Instead of selling it for six years, they sell it for five years. You can leave money on the table, like 2-4 years of payments, because you don’t know, and the difference between saying one thing with your breath and saying something else causes you thousands of dollars of cash flow over the next year or many years, with a buyer that would have been happy paying you eight years, instead of five. Of course, they’re happy paying you five, but they didn’t notice. Anyway, leaving money on the table, that’s the third mistake.

The fourth mistake is if you’re selling in payments, putting the wrong people in your home. I made this mistake. I’m a slow learner. It took me four years to stop putting the wrong people in my home. Because you can do everything else right, buy it right, fix it up right, and know what you’re selling it for. I don’t want to use this as an example, but then you follow your heart. There have been a couple of times where I’ve had a couple of choices of who to sell to. Do I go with the more logical business path? Or do I follow my heart and give these folks a fifth chance in life? I followed my heart, and I got burned. So, the fourth is putting the wrong people into the homes.

If I have to answer quickly, those are the four main areas where untrained people would make mistakes.

Robert Leonard  44:57

You talked about putting the wrong people into the homes. What does that mean? What makes someone “wrong”? Is it their credit score? Is it their job history? Background checks. Are those the same type of things you’re looking at for a mobile home as you would for a traditional rental?

John Fedro  45:12

Yes, and more. I am dabbling more and more with rentals now. I put the renters through the same hurdles and hoops that I make people jump through. That’s something I learned in the five years I started this business. I had a 100% default rate for the first four to five years of people I put in my homes. No one paid me off. I mean, they would stay there for a couple of years. Some people only stayed for six months, but people would leave. I also had to do two evictions, technically. I did two evictions, and I realized that when people can’t pay, they usually can’t stay. If they’re embarrassed about the situation, they don’t want to pay, they realize they overpaid. They’re only going to damage your place if they typically feel vindictive. If they’re angry with because you lied to them.

I mentioned that because I have a great deal of experience selling to the wrong people. And it’s not so much the wrong people. It’s like those people were good people, but maybe it just wasn’t the right time in their life to actually own something. I think statistics say that we move every few years anyway. We’re selling these homes for, as I’ve been saying over a couple of times on this podcast, five years minimum. If you put an ad out in the paper or online, and you are advertising, “Owner-financed! Rent-to-own! No banks needed!” You’re gonna get a lot of calls. I’m just making up a number here, but I think it’s pretty close, 97% of people that you deal with, you might want to go out and have a drink with, and they’re funny, and they’re cool. But you do not want to get into a five-year relationship with them where they’re paying you money, and they owe you money. It’s just important to know that, for every mobile home we buy, we only have to sell to one person. We don’t have to sell to 50 people. So I want to get the right person in there.

So, in my opinion, to find the right buyer or a low-risk buyer, I do look at their credit. I do look at their job history, their income, their debt, and call for references. I do a normal credit check and background check. And more importantly, what I’ve learned over the years is, a background check is not enough. Usually, you can tell a lot by a background check, plus going on Facebook, checking out the current home that they live in. What does it look like?

But also, and this took me years to understand and be confident about, I don’t want to just take one application and then approve my people. I want to take one application, then I want to take another, or I want to ask them for something else. Now, I need your social security card. Now, I need this. Now, I need you to do one other thing. Now, can you pull a credit report on yourself and then send it over?

I want to make people jump through hoops. I almost kind of want to poke the bear because if you think about it, I’m selling these homes, usually for a low amount down. If I can get 30% down, I can be more flexible, and I’ll look the other way on stuff. But if I’m only getting $2,000-$5,000 down, I want to make people jump through my hoops because again, I’m looking for humble sincere people that they know this needle-in-a-haystack opportunity. They’re saying, “John, what do I have to do? What do I have to give you to make this work? Do you need this? Here you go. Do you need this? Here you go.” I’m not looking for people that dodge my questions, call me back, have an excuse, or question, “Oh, why do I need to do that? I’ve tried to do this before, and I never had to put up with this kind of stuff.” That may not be somebody that I want to deal with if already, in our relationship, you’re getting snippy towards me.

So, it’s a combination of a lot of background checks, the attitude of the person, how much down they have, and do they have the ability to make these repairs? Are they just over-promising you stuff? What I just said took maybe five minutes to say, and it’s a lot of stuff, and it’s a pain, but it’s worth it. I would rather have my properties empty than have a risky or shady person in there. I’ve learned enough and I’m confident. It took me 18 years. I’m confident to say that. I do realize what I said was pretty thorough, and can seem like a high peak or mountain to climb, but it’s worth it. Yeah, to me, it’s worth it.

Robert Leonard  49:13

There have been a couple of times throughout this podcast, so far, that John has talked about something that I know I’m personally going to go back and listen to probably two to four times, specifically the criteria that he’s looking for. Cash flow return, payback period, and things like that. Go back and listen to that, again. Go back and listen to what he just said again about his criteria for accepting potential buyers. He said it’s heavy information, and it is, so go back, listen to it a couple of times. If you have to, take notes. Really make sure you understand it.

You mentioned you’d rather let it sit vacant, and I’m glad you mentioned that because I wanted to ask that. In a mobile home, if you decide to let it sit vacant for a little while because you can’t find that perfect person you really want to sell it to or maybe you just don’t have the demand that you expected,  what are the typical holding costs that you’ll have? You have taxes, lot rent, what else? What do those types of fees look like?

John Fedro  50:02

You should have the demand that you expect. You may even want to have a buyer’s list, or buyers beforehand. You should have the demand that you think. But as far as fees go, it depends. Like most things in real estate. It depends. The park you may have negotiated free lot rent, discounted lot rent, you may have to pay back the park five months of lot rent that the people you’re buying it from haven’t even paid. You may have to move the home or you may have to do more repairs because the park wants you to fix up the outside. If the electricity hasn’t been on for a while, maybe you have to get the home inspected, and then do other repairs that way.

But I’d say, for the most part, the normal holding costs are the lot rent to the park, electricity, possibly gas or propane, or water if that’s not included by the park. If any, debt service, if you’re paying the seller any monthly payments. But you should really negotiate any payments to the seller for like starting until you put the buyer in there. But really, it’s mostly lot rent.

Robert Leonard  51:03

So, to wrap up the show, I don’t think we could record a podcast when we are now, late April, without at least talking about the Coronavirus pandemic for a minute. So, we’ve been into it for about five or six weeks now. How has this impacted mobile home investing? Is it an asset class that you expect to perform better or worse than traditional properties and strategies in times of crisis?

John Fedro  51:26

That’s a good question. I’m likening it to the 2008 crash. There are some similarities, and there are some differences. First of all, this might sound biased, but I think we’re going to be sitting very well as individual mobile home investors. If you’re buying the complete parks, you’re going to be sitting okay. There’s going to be a lot of pain. There already is starting to be hurt and pain in the market and this is just the first month. By the way, all my people that, when I am selling homes on payments, April’s been great. I don’t know how May or June or July is going to be, but people have been, I’ve had more people pay this month than usual. I’m not seeing any sort of wave where everybody can’t pay, and it’s going out of business. We are dealing with affordable homes. We’re typically selling these homes, as well. Remember, if people don’t pay us, not only are they’re losing their home, but they get out of this whole deal. They’ll be losing the opportunity to actually buy something. Everything they’ve put into this home, they have the potential of losing. In three months or six months, this may change, but I haven’t been seeing people not being able to pay with regards to my homes, selling on payments.

I have been seeing, and this is very early on, across the country, there’s a decrease in sellers depending on where you are. There’s between like 20% and 40% fewer sellers because people are just holding on to their homes if they don’t have to sell. They don’t want to show them. They don’t want people in their properties. They’re not sure what’s going to happen. They’re waiting until it shakes out. But they are still sellers in the market. Now, if you don’t have to sell nor don’t necessarily want to sell, but we have been seeing an uptick of more people needing to sell due to Coronavirus reasons. They either need to take care of a relative that’s in another state. They thought they had their home sold, and then the buyer flaked out because they’re holding on to their money, and now the sellers react, “I need to sell. I thought I had a buyer, but now I don’t. And now I need to sell even quicker.” Or, they’ve directly lost their job. Some people are living in a mobile home, paycheck-to-paycheck, working at a diner or restaurant, but they lose their job, and now, they need to sell. We’ve been seeing that already.

People have been dropping their prices from the $20,000s down to under $10,000 because they need to sell their home quicker. They’re losing their home. They’re behind on payments. So, there’s already been a tick up in people needing to sell. But, I don’t want to make it sound like, “Okay, as a mobile home investor, we’re going to start seeing people that need to sell more,” which we are, and I don’t even think we’ve seen the real wave coming yet. But the difference between now and 2009, when we had similar fears, is that more investors are looking at mobile homes now, and the prices are higher. Single-family homes have gone up in price in most areas around the country, pushing mobile home prices higher, as well. So, the difference between ’08 versus today is that there are more buyers.

So, what I think is going to happen is we are going to see an increase in sellers, but don’t think if you’re listening to this podcast that you’re going to make some really sweet deals, like even more amazing than we usually do. I don’t think that’s going to be the case because you’re still going to have the buyers there. There’s going to be more sellers. They’re going to have hardships, but we’re still gonna have to pay the normal amounts we do. We’re still going to make our money back when I said, we’re not going to get like extra sweet deals. Sometimes we will, but I do think there is going to be a wave, and we still have to act quickly. Some things have changed. Some things haven’t. I do think there’ll be this wave, but we’re still going to have to have our reputation act quick, know our numbers, still resell on payments, probably. There might be fewer cash buyers out there, but there will still be some. So, some things will change, but I don’t think we’re going to be sitting pretty well as individual mobile home investors.

Robert Leonard  55:33

It’s funny. You mentioned that you’ve had good payments in April. I have that with my portfolio, as well. I’m not in the mobile home space yet. I’ve mentioned that a couple of times throughout the show. But as for my traditional rentals, we got paid I think a week or two early in April, and we got paid like three weeks early in May for everyone. We’re already fully paid through May. I said to my business partner, “What is going on? We’ve never been paid as well in ever.” I don’t know what’s going on, but we’ve been having great, great payment history as well.

John, I’ve really enjoyed this conversation. I can’t wait to dive into the mobile home space myself. I’m going to continue studying it. I’m going to do it soon. 2020 might be the year. I hope everybody listening to the show today enjoyed the conversation as much as I did, and I’m sure they will. For those that want to connect with you further, where can they go to find you?

John Fedro  56:16

Well, I’m sure all over the internet, but mobilehomeinvesting.net is a great place for free resources, mobile home videos, and paperwork, scripts. You can reach me there, as well.

Robert Leonard  56:32

Of course, I’ll put a link to that in the show notes for everyone listening today to go check it out. 

John, thanks so much.

John Fedro  56:39

Thank you so much for having me.

Thanks, everybody! I hope this was helpful.

Robert Leonard  56:42

Alright, guys! That’s all I had for this week’s episode of Real Estate Investing. I’ll see you again next week! 

Outro  56:49

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