The Multifamily Real Estate Experiment Podcast
“Multifamily Real Estate Investing for the Career Professional.” Join Shelon "Hutch The Marine Investor" Hutchinson who talks to military veterans and real estate professionals about the results of their journey and multifamily real estate experiments. Each week, Hutch discusses Multifamily Real Estate Investing for Career Professionals and military veterans to help you build wealth and financial independence. Questions about Multifamily real estate investing are systematically dissected as your host works through observations and data to answer the week's question.
The Multifamily Real Estate Experiment Podcast
MFREE 117 Trailer # 4 with Kevin Bupp: Why do most institutional buyers avoid owning homes?
In this episode, Kevin Bupp breaks down how real value in mobile home park investing comes from the land, not the homes. Since the homes are considered personal property, like cars or trucks, they tend to lose value and create more management headaches.
The better play is to own the land, collect durable lot rent, and sell off the park-owned homes when possible. Doing this simplifies operations, reduces turnover, and increases exit value by making the property more attractive to buyers who don’t want the hassle of owning homes.
Kevin explains how this model leads to more predictable cash flow, lower expenses, and even cap rate compression when it's time to sell.
#MobileHomeParks #CashFlowStrategy #OperationalExcellence
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hutch@hsquaredcapital.com
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The durable income we want is on the lot. Income itself, not on the actual income from the home if it's a rental. These homes are personal property. Classified as what's called chattel. And so they're no different or no different classification than like a vehicle, a car, a truck. So, they tend to depreciate in value because they're personal property. They're not attached to real property. When we buy a new mobile home park, that has units owned by the community, we evaluate it separately. We capitalize the income on the park, and come up with a valuation in that manner. And then we just put a shell value on the home itself. What happens is, when we can sell that home off the end user. The desirability goes up quite a bit because most other buyers in the marketplace, especially institutional buyers, don't want to own any homes. They have no interest in owning homes. They don't want, they don't wanna be in the rental business'cause they know that it's just a lot more turnover. The income's not as sticky. Typically what we'll see is cap rate compression. If we can get rid of. All the park owned homes over a period of time and then turn around and sell that property. Whereas if it had park owned homes originally, it might have, maybe it sold for six cap. But if we can get rid of all those park owned homes and sell it as a fully stabilized property with no rental units it might get a 25 basis point, maybe even a 50 basis point premium on cap rate. So we actually get my some cap rate compression because now we're selling an asset that. it's got lower maintenance requirements. We don't have to have as much, involvement from a community manager to oversee it. We don't have to have maintenance guys on staff. It's really simple and there's very little turnover. We're not involved in leasing homes. We're not involved in selling homes. It's a very simple business model. Once we can get to that point.