What’s the easiest mobile home park turn-around strategy? Not turning one around at all. In this final installment in our five-part series on “Easy Turn-Arounds” we’re going to examine we’re going to talk about the simple model of “flipping” mobile home parks – essentially buying them at a low price and re-selling them immediately thereafter or tying them up under contract and selling an assignment of the contract. Learn the theory and reality of profiting from mobile home parks without even picking up a piece of litter.
Episode 48: The Easiest Turnaround Model Of All Transcript
Flipping burgers has never been a very good career choice, unless you're Ray Kroc, but flipping mobile home parks can be very, very lucrative. In this final installment of our five part series on easy turnarounds, we're going to go over the easiest turnaround of all. That's basically buying mobile home parks or putting mobile home parks under contract and selling them at huge profits before you even have to do any work. Now, there's basically two kinds of flips in the mobile home park sector and I'm going to go over both of them. The first one is buying a property and then holding it for a very short period of time and reselling it. Pretty standard fair in the world's of flip. You see this all the time on TV with the Flip or Flop shows. This is the mobile home park style of that.
The other one we're going to talk about is selling an assignment of a contract. Now, that's one you don't see on television much. I don't think I've ever seen an HGTV show on assigning contracts, but in the mobile home park sector, that's another very popular plan to create value without putting any effort it. Let's go over each example. First, let's go over the real life example of a park that we bought down in Texas and then we flipped it less than a year later for nearly a $1 million profit. I think that would definitely count as an easy, easy turnaround. We had hardly ever even done a thing to the property, other than close on it, get ready to start our turnaround program, and bingo, somebody wanted it more than we did, and we sold the thing for a million dollar profit.
Let's look at another example. That is, of an assignment of a contract, and that's an easy one. The first one that comes to mind was a bootcamp attendee at our Mobile Home Park Investors bootcamps that we do, and they found a park right out of the shoot through a contact from their family down in Missouri near another mobile home park that we own, and they assigned that contract to us for $100,000 cash. That, I think, we would all agree was a heck of a good turnaround plan to basically ... All you had to do was sign the contract and then sell the assignment of that contract. Now, how does that work? How does the contract assignment thing work? We call all obviously understand flipping something that you just bought, which we'll go over in a minute more in depth, but how do you assign a contract?
Well, here's how it works. Basically, when you assign it, each mobile home park contract you enter into today, you typically do and/or assigns. You do that because everyone has learned over time that you never want to buy a property, a mobile home park of any type, in your personal name. It's just bad business. When you put it in your own personal name, you inherent all the liabilities. It's just really unprofessional. What the banks want you to do, and your insurance agent wants you to do, is to buy every mobile home park in its standalone LLC, limited liability corporation. What most people do when they buy mobile home parks is they set up an LLC right before closing to assign it into, but because of that structure, your contract must allow for that. Every buyer today who knows what they're doing signs the contract with their name or even an entity name, and/or assigns. That's the plan.
When closing comes, they'll form the entity and assign it in, but it doesn't restrict you to simply your own entity. What that and/or assigns language does is it allows you to assign that to anyone or any entity, which means you can assign the contract. Now, always ask your lawyer's judgment. I am not a lawyer. I'm just telling you how we see things in the states that we're in. But this opens the door to a very lucrative concept and it's actually a win-win for everyone. There's people out there who have lots of capital and want to buy deals, but they don't have enough deals. When you find a deal that doesn't fit your criteria, you can then basically assign it to them so they're a winner, and at the same time, the seller is also a winner because this other group is probably a little more capitalized and a lot more enthusiastic about the property than you are, or you would not be assigning the contract, which means it's even more likely that it will close.
That's why mom and pop assigned the deal to begin with, is they just wanted to get the deal closed. That's how an assignment works. Now, in both of these cases, both example A of selling a property after you buy it at a profit and B, selling an assignment, there's certain things we want you to think about. These are the key takeaways and there's four of them from this, our final fifth installment in the Easy Turnaround series. The first one is you always want to make every deal in your entire life on the market 24 hours a day, seven days a week. You should never take anything off the table. Warren Buffet, I'm sure you've heard of him. He wrote a letter to his investors a few years ago and it was a very odd letter that people talked about. It had a lot of attention in the media because it was so very strange.
Here's Warren Buffet, who's the biggest investor, or the most successful investor in American stocks of all time, and he writes his letter to the investors who invest in Berkshire Hathaway regarding a real estate transaction, or a possible real estate transaction. You see, Warren Buffet owns one investment property. He owns a strip shopping center across from New York University and he gets offers on it all the time because it's not up to date. It doesn't have fancy Starbucks and things in it, so people frequently contact him trying to buy this strip center across from NYU. Warren Buffet's philosophy is when people try and buy things from you, if you turn down their offer, it's no different than you buying it at that same price. He's exactly right on that. What it means is any time someone gives you an offer, the key question is, would you buy that same asset back for that same price at that moment?
If the answer is no, then you need to sell it. What it also means is that everything in life, not your family, not your dog, not your family heirlooms, but everything else should always be on the market at every moment. If you drive to Walmart in your car, in your SUV, and you know the blue book value is $20,000, and someone in the parking lot says, "Oh my gosh, I really like that car. I'll give you $30,000 for it." You should not say, "My car's not for sale." You should say, "Great, when do you want to close?" If they say, "Here, I've got $30,000 right now," and you can produce the title, I would call Uber and get a ride home. Because everything should always be on the market. That's the only reason you can actually flip things and sell things on an assignment is if you have an open mind and you entertain any offer at all.
Number two, always watch for under priced deals. Whenever you see an under priced deal and you don't have the capital to buy it, and you're not even sure you'll want to own that in that location, still try and get it under contract if you can, because there's no harm done if you try to sell an assignment. Even if you fail miserably, you're out nothing, as long as you've got a good due diligence provision in your diligence, and a financing contingency, and again, make sure your attorney and you have read the contract closely and you know exactly what you're signing. But if you sign a standard contract with due diligence out, where you have the ability to cancel at any time for any reason, you don't have a lot of risk in the deal. If you know it's a really, really good deal, they'll be plenty of people out there wanting to buy the assignment of the deal.
Always watch for under priced things, even if it doesn't exactly fit what you're looking for because there's always profitability in finding and locking up under priced assets. Another important feature is you've got to move fast when you're dealing in really good deals. Deals that you can flip or deals you can sell assignments of are by nature under priced. They're by nature in areas that are hot for other buyers. Certain markets, certain deal sizes, certain dynamics of the deal, certain infrastructures. These things don't sit on the market long, so when you see one, you've got to grab it. Don't let it go. When you're looking at assets that are not super desirable ... Let's be honest, there are many mobile home park deals out there that are not super desirable based on the current terms of what the seller's asking.
You may mold them into being more desirable through negotiation, but on the surface people are not beating down their door. But there are other deals out there that are really hot. There's a lot of demand. You got to seize the moment on those deals. Don't think about it. Don't say, "Well, I'll ponder it over the weekend." Bad idea. It won't be there on Monday. When you see things that are really, really under priced, and you'll know when you see those things, jump on them right then. Don't let them go. We have an old saying, I've got a motto that hangs on the wall of my office. It says, "Time kills deals." What it means is, life is nothing but an endless sense of urgency. Every possible deal out there you have got to seize the day. You've got to harness the power of it, because they don't last. Don't forget, time kills deals. Always be urgent.
Finally, don't prejudge buyers. When you're going to go ahead and resell or think about assigning a contract, don't prejudge your buyers. The group that bought the park from us in Texas, I wouldn't have thought they would've actually done it. I wasn't really convinced in any way they were legitimate up until the moment of closing. I didn't really think it would happen. We've also assigned deals and bought deals from people and you don't really think that, "Oh my gosh, they just don't look right. They don't look like they got the money, or that they're real estate people." Don't ever prejudge. When you start prejudging what happens is, you start taking things off the market. Someone makes you a good offer and you think, "Nah, they're not real. They're not ever going to really close. They don't really have the money." That is a terrible, terrible strategy for you to take.
Back when my wife worked at Neimans, one of the things they would always teach people is you never know what the buyer's really going to look like. People would walk into the Neiman Marcus store in bare feet wearing a gunny sack and buy $500,000 of stuff because her husband had just struck a giant oil well. Other people would come in nicely dressed and wouldn't buy anything at all. Don't think you have the power to decide who's a real buyer and who's not. Always keep all your assets extremely fluid. They should always be on the market at all times and you should always have an open mind on any potential buyer. Don't close the door on opportunity because that person doesn't look like your stereotype of what a real estate buyer should look like.
Now, easy turnarounds we've gone over in many different forms and fashions. We've gone over all the different things from controlling water and sewer, to filling vacant lots and homes, and all the different things you can do in the whole turnaround process, but we saved this final installment because, to us, there's nothing easier than making money with no labor at all. Every other scenario we've talked about through the entire series about difficult and easy turnarounds was based on some degree of strategy and some degree of effort, but we thought clearly the easiest kind is the kind in which you don't actually have to put out any energy. All you're basically doing is triaging real value to what you've got without having to tap into it. It's that one final step.
You know this is a good deal, you know that this could make money, but instead of having to do it, and whatever the turnaround plan may be, raising the rents or whatever it is, without you physically having to do it, having any risk in doing it, having any effort in doing it, you basically sell it to somebody else and let them do it. That's the easiest turnaround model that can exist. Now, that completes our five part series on turnarounds and this section of Easy Turnarounds. We're about to start up another section on our next Mobile Home Park Mastery podcast.
We're going to talk about the top five tools of a park owner, and what they are, and how they work. How do you harness technology in the modern world as a mobile home park owner? What are the key items that you carry in your car or in your home office? What do you do to take control of that mobile home park in the most efficient and least costly manner possible? We're going to be going over that in depth starting at our next Mobile Home Park Mastery podcast. I hope you enjoyed this series on turnarounds. This is Frank Rolfe with the Mobile Home Park Mastery podcast series. I'll be back again with you soon.