Chris Prefontaine and Derek break down buying manufactured homes in mobile home parks, covering deal criteria, land contracts, and mortgage structures. Minnesota investors face a licensing trap: the state may classify the activity as brokering even if you own the property outright. They recommend using manager-managed LLCs for each property to create separation and reduce audit risk.
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Get that criteria. Let Derek and I look at it, what you're willing to do in there. And if 3 out of 10 do it and you're excited, that's a huge win. If 10 out of 10 do it, okay, great. You have it. You've carved out a little niche that nobody else can touch.
Yesterday afternoon I was in— you guys are going to— but I was in the mobile home park closest to our house. Okay. And met with a lady that's in a bad situation. She wants to just sell it outright. Not really sure where we want to be. But this morning, my phone has been ringing off the hook. Apparently, she took a snapshot of my business card, which is great normally. But apparently she took a snapshot of my business card and sent it out to pretty much everybody in the community.
The park there?
Yeah.
Right. Which, which is normally very, very good. My concern is I'm not, I'm not exactly sure. And maybe this is more of a one-on-one conversation with you, is just not exactly sure how tied up we want to get in these mobile homes, especially not on owned land.
It's definitely okay for this conversation for everyone because I want everybody's feedback, including Derek here. My knee-jerk just goes to high level, goes to why don't you come up with some criteria that you're willing to work with within the park? That's just, here's how I do it. And if they don't do it, they don't do it. That's kind of not being crass or rude. Just, yep, we can do— here's how we do it. That's where my head goes. Derek, what are your thoughts? You're closer to her.
Yeah. Is this the same one where you were having an issue That where you had to have a land contract versus—
Right.
Okay.
So the person that— the person that sent out your business card, is that the same person that was giving you a hard time about the land contracts?
No, that was— there was a park that was originally doing that. And now this park is also the same way. However, the new attorney that Chris and I found, here in Minneapolis knows exactly how to get around that or how to word the contracts for that. So even if they have, say, a large mortgage, which majority of the people it sounds like that she gave my card to have a large mortgage, we can still work with them and work around the park and get the wording in there.
Okay, so then to strengthen Chris's point, I think you just say this is what we do. And This has to be done with these documents in place so that we're in compliance with the park management. And if this, you know, solves your need, you know, we're ready to move forward.
Okay. Now, the other thing is in Minnesota that I'm starting to hear down the pipeline, our attorney happens— or the one that Chris and I found Happens to be a realtor and a broker. We're going to be doing ideally 1 or 2 of these in an LLC maximum. However, because I would be the main person on each LLC, I could potentially look at getting in trouble in Minnesota for doing these and not having a realtor's license. Is that something anybody else has ever run into?
I want to clarify that, and maybe Garrett knows more than me, but why are you going to get in trouble?
Because they're manufactured homes.
What does that have to do with— Yeah, you're buying it.
It's you. You're not brokering. If you do lease purchase, I could maybe explore an option.
Supposedly in the state of Minnesota, even if they're my properties, I'm still considered brokering.
Okay, so I don't know. So I could see some, some Dodd-Frank issues potentially.
A LLC would get rid of that, right?
Which would be federal. But clearly we're not Minnesota experts. But if you're a principal to the transaction and you're the one owning the property and you choose to lease it to somebody else or at least purchase it or land contract to somebody else. I don't, I don't know where they're coming from. Now, going to the LLC thing, do you know there's a difference between manager-managed LLCs and member-managed LLCs?
No, I did not.
Okay. So if you set up your LLCs as manager-managed, another, another company, another entity can be the owner of that LLC. So like my structure is I have a parent, I'll call it a parent LLC, and that LLC owns the other LLCs.
That's how we do it.
Okay. So, so you're not, you're not the owner, you know, of all these individual LLCs. The parent LLC is.
And What if I'm owner of the parent LLC? Does that—
You are. Which you are. Okay. But that doesn't matter. It— well, let me say that I'm not giving you legal advice. It shouldn't matter. I've never seen why that would matter unless Minnesota has some really odd state law.
Well, we have several, but—
Well, I know you do.
Remember, this also begs that someone's auditing or watching you too. I'm just getting another layer.
Yeah. Challenging it, right?
Yeah.
So, so essentially, if you want to have 2 properties per LLC, you would have the— like for me, I would use it if you don't have a business partner. I don't know if your husband is on your LLCs or not, but if you had single-member LLCs owning the properties, and those single-member LLCs were owned by the parent LLC, which is manager-managed. They're all manager-managed. Anybody that starts digging into the public records, they're, they're going to see that 123 Main Street LLC is owned by LLC. By the way, I would never use your last name in the name of an LLC, but that was easy for me to do real quick. And they would have to really dive deep to start figuring out the structure of everything, which again, unless you're being subpoenaed or, you know, brought into court for something, I don't see who would be watching that.
That's where I was going to do the right thing. It's usually not a surface issue.
Yeah.
Well, it's my thing. What I was not even sure what to Or where to start to research it to see if this is indeed something I had to worry about, or if I do have to worry about it, how to get around it. This sounds— which I'm, I'm surprised that the new attorney that we spoke to, Chris, didn't mention the manager-managed LLCs.
They never do.
Well, yeah, I was going to say he's not— yeah, we— because we're opening up a can that probably doesn't need to be opened. That's why. Not sure where to get started? Go to smartrealestatecoach.com/getgoing for free books, strategy calls, and a whole bunch more. We're going to help you get going the wicked smart way. We've been after this for over a decade doing exactly that. Yeah, you do the right thing. You have your set structures so that back on the superficial level, you have your structures so that, and that you wake up in the morning and go, boy, if I get a call from them, they do my structure. I'm excited. Not, geez, I got to go over that. That's where I'd like you to be. And then the legal part of it, the way Derek said, is how we do it. I do a little more than 2 or 3, but whatever you're comfortable with, right? Lee Phillips, Derek used to say, if the basket of eggs tips over, you comfortable with what's in it? That's also if it's 2, okay, whatever's in it and you're comfortable with it, but get that criteria. Let Derek and I look at it, what you're willing to do in there. And if 3 out of 10 do it and you're excited, that's a huge win. If 10 out of 10 do it, okay, great. You have it. You've carved out a little niche that nobody else can touch.
