If anyone is considering investing in Mobile Home Parks, here's a great article that you may want to read...
Valerie
Non Performing Note Investing
August 3, 2010 by Jeremy
"A non-performing note is a property, usually in the commercial definition that is no longer able to sustain itself and defaults on its mortgage debt. Non-performing notes are a hot item for investors to get their hands on these days. They have been the bread and butter for the lucrative investor and it’s subscribers for the past 2 years. With tight credit markets, high unemployment and continued downward pressure on consumer spending and real estate prices, more performing properties will become non-performing notes.
The reason that so many investors both large and small seek non-performing notes is because of the extremely attractive pricing. People hear stories all the time about a property that was purchased for 40 cents on the dollar or lower, but they are extremely hard to find. The other barrier to entry for the average investor with non-performing notes is the cash involved to successfully close on a non-performing note. Banks typically will not carry any debt on a non-performing note, which means investors have to be well financed in order to successfully close a transaction.
Non-performing notes are priced so aggressively because the bank has a wart on their balance sheet that is not only performing, but has not yet gone through the foreclosure process to wash out the liens and other clouds on the title that keep the property from re-structuring towards a performing asset again. Often, non-performing notes involve a lot of work and will have plenty of obstacles to over come once purchased, but the bank realizes this and prices the asset very aggressively to sell.
One of the most recent non-performing notes the lucrative investor team was involved with was two mobile home parks located in the MI. We all know that MI is one of the worst affected states in America from the auto industry with high unemployment, but mobile home parks are priced at the level where it’s average family can afford, plus the owners are only responsible for collecting lot fees, not home upkeep and other headaches involved with lower priced rental properties.
The key to this deal were outstanding numbers. The previous loan within the past few years on these two properties was $18,000,000. The investor who purchased this asset had the contract with the bank for $3,650,000! Even at the 46% occupancy, it was operating at a 23% cap rate bringing in $73,000 a month income with the new debt piece only at $36,000! Now that is a cash cow.
On top of that, the investor had two as is offers at $4,500,000 and $5,200,000 that could not get the deal themselves because the first group had it locked up in contract. Hedge funds and other institutional investors have banking relationships like these where they are able to secure and close on deals for great prices. They take the time and effort to clear the title of any clouds and get the property operating again at an acceptable level where they are able to re-sell a clean performing asset and makes in some cases millions of dollars.
Non-performing notes are usually not a rosy picture when it comes to the task at hand of re-managing a property to get it back to an acceptable performing level, but hardly any other asset can offer such aggressive pricing and strong rewards for investors. As the housing correction continues to take place for the next several years, more and more opportunities will be available for investors who are well positioned and willing to take on risk for big rewards."
__________________
Valerie
“And will you succeed? Yes indeed, yes indeed! Ninety-eight and three-quarters percent guaranteed!” ― Dr. Seuss
"I believe in angels, the kind that heaven sends; I am surrounded by angels, but I call them friends" - Unknown
If anyone is considering investing in Mobile Home Parks, here's a great article that you may want to read...
Valerie
Non Performing Note Investing
August 3, 2010 by Jeremy
"A non-performing note is a property, usually in the commercial definition that is no longer able to sustain itself and defaults on its mortgage debt. Non-performing notes are a hot item for investors to get their hands on these days. They have been the bread and butter for the lucrative investor and it’s subscribers for the past 2 years. With tight credit markets, high unemployment and continued downward pressure on consumer spending and real estate prices, more performing properties will become non-performing notes.
The reason that so many investors both large and small seek non-performing notes is because of the extremely attractive pricing. People hear stories all the time about a property that was purchased for 40 cents on the dollar or lower, but they are extremely hard to find. The other barrier to entry for the average investor with non-performing notes is the cash involved to successfully close on a non-performing note. Banks typically will not carry any debt on a non-performing note, which means investors have to be well financed in order to successfully close a transaction.
Non-performing notes are priced so aggressively because the bank has a wart on their balance sheet that is not only performing, but has not yet gone through the foreclosure process to wash out the liens and other clouds on the title that keep the property from re-structuring towards a performing asset again. Often, non-performing notes involve a lot of work and will have plenty of obstacles to over come once purchased, but the bank realizes this and prices the asset very aggressively to sell.
One of the most recent non-performing notes the lucrative investor team was involved with was two mobile home parks located in the MI. We all know that MI is one of the worst affected states in America from the auto industry with high unemployment, but mobile home parks are priced at the level where it’s average family can afford, plus the owners are only responsible for collecting lot fees, not home upkeep and other headaches involved with lower priced rental properties.
The key to this deal were outstanding numbers. The previous loan within the past few years on these two properties was $18,000,000. The investor who purchased this asset had the contract with the bank for $3,650,000! Even at the 46% occupancy, it was operating at a 23% cap rate bringing in $73,000 a month income with the new debt piece only at $36,000! Now that is a cash cow.
On top of that, the investor had two as is offers at $4,500,000 and $5,200,000 that could not get the deal themselves because the first group had it locked up in contract. Hedge funds and other institutional investors have banking relationships like these where they are able to secure and close on deals for great prices. They take the time and effort to clear the title of any clouds and get the property operating again at an acceptable level where they are able to re-sell a clean performing asset and makes in some cases millions of dollars.
Non-performing notes are usually not a rosy picture when it comes to the task at hand of re-managing a property to get it back to an acceptable performing level, but hardly any other asset can offer such aggressive pricing and strong rewards for investors. As the housing correction continues to take place for the next several years, more and more opportunities will be available for investors who are well positioned and willing to take on risk for big rewards."
Valerie
“And will you succeed? Yes indeed, yes indeed! Ninety-eight and three-quarters percent guaranteed!” ― Dr. Seuss
"I believe in angels, the kind that heaven sends; I am surrounded by angels, but I call them friends" - Unknown
My journal: http://www.deangraziosi.com/real-estate-forums/investing-journals/59110/...