Mt. Pleasant Mobile Home Park II

Angela says,"This first mortgage offering is an in-house refinance where this borrower is simply seeking a lower rate, i.e. no cash-out. Since 2018, this borrower has remitted monthly payments based on a note rate of 12.9%. Given the borrower's consistent payment history for the last 28-months, and that this refinance does not include any cash-out, Blackburne & Sons is offering a note rate to 9.9% ( 8% yield to investors), equating to a savings of almost $1,000 per month. Past performance is never a guarantee of future performance, but if a borrower can sustain payments at a 12.9% rate, one may find this offering at a lower rate even more attractive given the reduced payments and thus increased cash-flow for the borrower. At 8% yield and a 35.8% LTV (based on a MAI appraisal), let us know if you may find some interest in adding a piece of this offering to your portfolio."

Blackburne & Sons is pleased to present this $286,000 first mortgage secured by a 71-unit mobile home park, i.e. 70 mobile home pads with one residential unit, located in Mount Pleasant, MI. This new loan is an in-house, rate and term refinance, i.e no cash-out, of a performing loan serviced by Blackburne & Sons since 2018.

Mount Pleasant is a city located in Central Michigan and is the county seat of Isabella County. Part of the city (population of 8,741) is located within the Isabella Indian Reservation, the base of the federally recognized Saginaw Chippewa Tribal Nation. The subject city is also home to the main campuses of Central Michigan University, one of the largest universities in the state with 20,000 students at Mount Pleasant, and Mid-Michigan Community College. The student population nearly doubles the population of the city during the academic year, making it a college town.

Isabella County is included in the Mount Pleasant Micropolitan Statistical Area in Mid-Michigan, also known as Central Michigan. In 2018, Isabella County had a population of approximately 70,000 people and a median household income of $44,408. The subject MSA and immediate area reflect steady population increases from 1990 to 2017 with a light decrease up to 2020 and are projected to see slight population decreases over the next five-year period. The median property value is $131,500 and the home ownership rate is 61.8%. For more information on Isabella County, Click Here.

Located in Union Township (Mt. Pleasant), the subject property is located on 14.33 acres of land, made up of four different parcels. While the site is improved with 130 mobile home park pads, only 70 of the pads are currently operational. There is also one two-bedroom, tenant-occupied residential unit, so the appraiser has based his value on a total of 71-units.

The subject features three permanent structures; a leasing office, a maintenance garage and a two-bedroom residential unit. The site is also improved with asphalt paved road and street lighting. The property has two curb cuts along the east side of Bradley Street, which is considered adequate for access to the subject site. At the time of inspection, the park was 94% occupied based on 71-units. Each home site contains a concrete pad for the home, gravel or asphalt parking spaces, a well each site has access to the municipal water/sewer system and gas and electric services. Per the January, 2021 rent roll, monthly rent for each pad is $300 per month. The appraiser concluded the current rent is in-line with market rent and thus the pro-forma provided is based on market rent of $300/pad per month, and $400/month for the residential unit.

Title to this property will be held by a Michigan limited liability company (LLC), which is a single-asset entity. In 2019, the LLC reported a net rental loss of ($11,228) and in 2018 reported a net rental loss of ($42,839). However, when adding back depreciation, the subject property generated $2,669 of net rental income in 2019, and $17,989 in 2018.

Our guarantors are a married couple with a net worth of $768,420 and mid-credit scores of 776 and 782. Please note that their stated net worth is inclusive of the subject property. Working as an operations manager and a corporate officer, they reported a combined income of $119,903 in 2019 and $140,455 for the year 2018.

VALUATION SUMMARY

We hired a local MAI appraiser to value this property which provided an AS-IS value of $800,000. A local broker was also engaged to perform a drive-by opinion of value and provided a range value of $575,000 to $600,000. Note that the MAI appraisal completed in 2018 for the original loan reported a value of $640,000.

At an 8.0% yield to the investors and a 35.8% LTV (AS-IS Appraised Value) this appears to be a reasonable investment. Investing in any first mortgages 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 Angela Vannucci
555 University Ave., Suite 150, Sacramento, CA 95825
Telephone: (916) 338-3232 * Fax: (916) 338-2328
Real Estate Broker -- California Bureau 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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