Tooleys Mobile Home Park

Angela says, “A wise-man once said that everyone needs a place to live and thus multifamily deals can be a desirable property-type to add to one’s private-money portfolio. Today we present a first trust deed secured by a 10-unit, mobile-home park at a 8% yield. Add that this multi-family property is located in California with a reportedly strong demand for affordable housing in the immediate area, this deal is looking better and better. This offering also includes a repayment structure in Year 1 (details below) that allows for an additional 2% interest to accrue and compound for the first twelve-months. If you are looking to invest in a California, multi-tenant property with the potential to earn a modest return for at least two years, this is a deal to take a good look at.”

YIELD Information/Disclosure: Interest will accrue (and compound) at a rate of 10.0% (net of servicing) for Year 1, however, payments will be collected at a rate of 8.0% (net of servicing) for the entire initial 60-month term of this offering. If the borrower pays as agreed and does not pay the loan in full within 24-months, i.e. 2-years, the additional 2% that is accrued/compounded in Year 1 will be credited towards payment in full. But, if the borrower defaults or pays in full within 24-months, the 2% additional interest will be collected when the loan is paid in full. Click HERE for copy of the disclosure related to this repayment structure.

Blackburne & Sons is pleased to present this first trust deed, secured by a 10-pad mobile home park, located in Bishop, California. Four (4) of the ten (10) mobile-homes are park-owned and included in the security for this trust deed.

The proceeds of this $357,500 loan will pay in full a recently matured note in the amount of $322,000, and the remaining balance will go towards completing minor renovations to the park.

COUNTY and CITY INFORMATION

The city of Bishop is located in Inyo County, which lies in the eastern central part of California, between the Sierra Nevada mountains and the State of Nevada. With an area of 10,192 square miles, and a population of 18,546, per the 2010 census, Inyo County is the second- largest county by area in California. Present day, Inyo County has been the historic homeland of the Mono Tribe, Costco people, Timbisha, Kawaiisu, and Southern Paiute Native Americans. Inyo County is also home to Mount Whitney, the highest point in the contiguous United States and the 12th highest peak in the U.S., as well home to Badwater Basin, in Death Valley, the lowest point in North America.

Bishop is the only incorporated city and the largest populated place in Inyo County. The city is located near the northern end of the Owens Valley, at an elevation of 4,150 feet. Located near numerous tourist attractions, Bishop is a major resort town; the town is a commercial and residential center, while many vacation destinations in the Sierra Nevada are located nearby. A number of western films were shot in Bishop, including movies starring John Wayne, Charlton Heston and Joel McCrea. It is on U.S. Route 395, the main north-south artery through the Owens Valley, connecting the Inland Empire to Reno, Nevada. US 395 also connects Bishop to Los Angeles via State Route 14 through Palmdale. Main Street through Bishop has a variety of restaurants, bars, retail shopping, and galleries, such as national and international food drink including Starbucks, Denny's, El Pollo Loco, McDonald's, Dominos, Little Caesars's and KFC. The commercial real estate supply and demand is considered to be balanced.

SUBJECT PROPERTY DETAILS

The subject property’s location is just southwest outside the town of Bishop, easily accessed via Highway 395 (the primary arterial through Inyo County). The 1.00 acre subject site sits on the east side of Watterson Road, a minor north-south road, and is level and on-grade with the road and surrounding parcels. Uses to the north and south are residential, and the subject is less than 10 minutes from town by car.

Constructed in 1965, this 10-unit mobile home park, consisting of 4 park-owned units and 6 tenant-owned units, is a well-established Senior Residential Community, with all but one unit occupied. The park owned units are A, B, C, and H and will be secured with our loan. The largest unit is occupied by borrower’s in-laws but is not charged rent. And Unit C is currently being renovated to be leased out. Each dwelling space is fenced and has at least one parking space. The site improvements primarily consist of double-wide mobile/manufactured homes, however there are a few single wide mobile homes. The subject includes one interior asphalt street accessed over an easement off Watterson Road. Electricity, sewer, and water are on-site, and propane is also available. You can find more detailed information on these park owned units in the appraisal. The monthly rental income varies per unit, but the current gross rental income is $4,915 per month. Once renovations are completed for Unit C and this unit is leased, the projected scheduled gross rents are $5,795 per month.

The subject is in a Flood Zone X which is an area designated by the Federal Emergency Management Agency (FEMA) as having a moderate or minimal risk of flooding. No flood insurance is required.

Per the borrower, Bishop is a year-round resort/outdoor activity hub. Tooley's Mobile Home Park is a well-established 55+ senior adult residential community located in a very desirable resort area of Bishop, CA. Surrounded by Bishop Creek, the park has year-round surface streams which meander through man made channels throughout park property. Some tenants literally fish in their back yards. The tenants who reside in the park established longevity in this area ranging from 6-30 years. Low turnover contributes to a stable net-ability.

The park was purchased for $450,000 in August of 2014 in an installment sale, of which, the active members of the LLC contributed $162,000. The installment sale note was due as of August 2019.

BORROWER SUMMARY

Our borrowers are a married couple that hold title through a California limited liability company. Each will personally guarantee this loan, as well. Even though they reside in Bakersfield, California, their in-laws live in one of the park owned units to “manage” and keep an eye on park operations. In 2018, the property reported net loss of ($305) and net income of $4,950 for 2017, after adding back depreciation each year. The 2019 profit and loss statement provided for the park reports net income of $28,139.

The husband works as a Chief Estimator (functioning as an engineer, providing bids etc.) for Northern Digital, and she is an Executive Grant Program Coordinator for the SBA small business development. Our borrowers reported adjusted gross income of $75,771 in 2018 and $61,968 in 2017. The borrower has not filed their 2019 tax returns as of yet. They have mid-credit scores of 637 and 653, and have a reported net worth of $1,433,240. Their credit scores took a hit in early 2020, however since then, their scores have been on the steady upward climb; a letter of explanation on this matter will be provided in the due diligence package.

The borrowers plan on using the proceeds of this loan to pay off their recently matured note and use the rest for park renovations and closing costs. Their proposed renovation plans include upgrading to a larger water tank to increase park flow, adding new gravel to common areas throughout the park, upgrading to drought-tolerant landscaping, complete interior renovations for unit C and adding a motor home rental that will serve as an Air BNB.

VALUATION SUMMARY

A local, MAI appraiser was engaged who valued the subject property at $750,000.00 AS-IS (real estate and mobile home value). We also engaged a local commercial broker who drove by the subject property and performed an AS-IS opinion of value (BPO), concluding a value of $550,000. Due to the difference in values between the appraisal and BPO, this loan was calculated at 65% LTV based off of the BPO value, and 47.7% LTV per appraisal.

At an 8.0% yield (see Yield/Information Disclosure above) to the investors and a 47.7% LTV (appraised value), this appears to be a reasonable investment. Investing in any first trust deeds involves substantial risk, so be sure to read the Risk Factors section of the Offering Circular carefully before investing. A large and prolonged decline in real estate values is possible. Foreclosed commercial properties almost always need to be renovated before they can be leased or sold, so be sure to maintain some liquidity.

You should spread your mortgage investment portfolio out among lots of different deals. If you have $300,000 to invest, you should invest $10,000 to $20,000 in 15 to 20 different fractionalized first trust deeds. For example, if the deal is a $300,000 first trust deed on an office building in Boise, with a $15,000 investment you would own 5% of the loan. By spreading your money out into a bunch of different deals, you are achieving the diversity of a fund without the failed fund sponsor problem. If you are extremely wealthy, you could double (or even triple) my suggested investment amounts, but be careful about pouring too much money into a single deal. We once had a whole building fall into an old coal mine. Ouch.
Be wise and resist investing in any first trust deed yielding more than 9%. I would personally never invest in a first trust deed with a double-digit yield. The payments slowly grind the borrowers into the dust.
Blackburne’s Law theorizes that a portfolio of 8% and 9% first trust deeds will outperform a portfolio of 11% and 12% first trust deeds over a seven-year term. Only our wisest (and eventually the happiest) investors listen to me.
You can also buy some of our smaller deals in their entirety, but I only recommend this if you are richer than Crassus.
It is very easy to lose money in hard money first mortgages, so fight-fight-fight against the temptation to invest in high-yield deals. As Nancy Reagan used to say, “Just say no.” But if you choose 7% to 9% first mortgages, I predict that you will be very, very pleased.
During the S&L Crisis, commercial real estate fell by 45%. Within three years, values reached new highs. During the Dot-Com Meltdown, commercial real estate fell by 45%. Within three years, values reached new highs. During the Great Recession, commercial real estate fell by 45%. Within three years, values reached new highs. Some time in the next decade, we will have another opportunity to snatch up prime commercial real estate at a huge discount. You will be terrified, but when Blackburne and Sons invites you to join a syndicate to buy a nice commercial property at a 35% discount off its prior high, just remember that the best time to invest is when blood is running in the streets. Why not when real estate has fallen by 45%? You’ll never catch the very bottom because historically the bounces off the bottom happen much too fast. Bounce-soar. You will be terrified, but just remember that the best time to invest is when blood is running in the streets.

Blackburne & Sons Realty Capital Corporation--For more information, contact George Blackburne IV
4811 Chippendale Drive, Suite 101, Sacramento, CA 95841
Telephone: (916) 338-3232 * Fax: (916) 338-2328
Real Estate Broker -- California Department of Real Estate -- License Number 829677 -- NMLS Number 103430
Publicly advertised to California residents only under California Department of Business Oversight business plan permit.
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