January 27, 2020

JF1973: Value-Add Mobile Home Parks and Commercial Ground-Floor Apartments with Gabriel Hamel

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Gabriel Hamel has amassed a multi-million dollar real estate portfolio consisting of single-family homes, multi-family apartments, commercial real estate, and mobile home parks. His 43-unit mobile home park had some value-add opportunities and Gabriel took advantage. Listen to this episode to find out how Gabriel purchased his mobile home park and other multi-family properties.

Best Ever Tweet:

“Do the math, know your market, and trust your intuition. Intuition goes a long way in this game.” – Gabriel Hamel, Hamel Investments

Gabriel Hamel Real Estate Background:

  • Real Estate investor, experience with Seller Financing and other creative purchasing structures
  • Currently owns 140 units
  • Based in Eugene, OR
  • Say hi to him at https://hamelinvestments.com/ 
  • Best Ever Book: The Big Leap 

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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless. This is the world’s longest-running daily real estate investing podcast where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Gabriel Hamel. How are you doing, Gabriel?

Gabriel Hamel: Hey, I’m doing great. Great to be here with you and your Best Ever listeners.

Joe Fairless: Yeah. Well, I’m looking forward to it and grateful that you’re on the show. A little bit about Gabriel – he’s a real estate investor, he has experience with seller financing and other creative purchasing structures; currently own 140 units and has another 60 under contract. Based in Duck Country, Eugene, Oregon. So with that being said, Gabriel, do you want to give the Best Ever listeners a little bit more about your background, and your current focus?

Gabriel Hamel: Yes. I started buying real estate in 2005. Shortly before that, I picked up Rich Dad, Poor Dad. Before that I didn’t have a lot of direction on what I wanted to do with my life. Read Rich Dad, Poor Dad, I got deployed to Iraq shortly after that, but constantly thought about the lessons I learned in Rich Dad Poor Dad. I came back, started buying property in 2005 when banks were giving loans to just about anybody. A couple of years into that, now it’s 2008, I own a couple of houses and banks are not giving loans out to people that don’t have jobs or money. So that’s when I really turned my focus into getting creative with seller financing deals.

Joe Fairless: You’ve got 140 units.

Gabriel Hamel: 140 units, yup.

Joe Fairless: Wow. What is the largest property that you have within the 140?

Gabriel Hamel: The largest property as far as the unit count, I have a 43-unit mobile home park.

Joe Fairless: Okay. So a 43-unit mobile home park. So of the remaining 97, what’s that?

Gabriel Hamel: It’s a big mix. I started off with single family and then smaller multifamily, a lot of duplexes, triplexes, 4-unit, 6-unit stuff. I have a couple of apartments that are 20-unit, 15-unit, but I still hold quite a bit of smaller multifamily as well.

Joe Fairless: Which one’s your favorite?

Gabriel Hamel: I am really liking the mobile home park.

Joe Fairless: Really?

Gabriel Hamel: I really am. Yeah, it had a lot of value-add opportunity. The 60-unit that you mentioned that I had in contract actually pulled out of that deal. And the one I purchased, the more I dug into it and the more I dug into the numbers, the better it got. The 60-unit I had in contract, the more I dug into it, the worse it looked. So I had to trust my instinct and trust the numbers and pull out of that one.

Joe Fairless: We’ll talk about the 60-unit in a bit. 43-unit mobile home park, you said that’s your favorite. You really like it. There’s a lot of value that you added. Will you elaborate?

Gabriel Hamel: Yeah, it was something I was looking for. I took it on similar to some of the multifamily stuff. I like to buy property that has that value-add opportunity, so I’m looking at properties that are poorly managed, under-rented, deferred maintenance. This park, it was running okay. The previous owners were great people and they ran the park okay, but there was some value-add opportunity with– the rents hadn’t been increased in four and a half years, the utilities weren’t being billed back to the tenants… So that was costing close to $15,000 a year, just there. Then some of the mobile homes themselves, a lot of the maintenance costs were on the park-owned properties. So right now, I’m in the process of selling the park-owned units back to the tenants on contract. In that way, they’ll be responsible for some of that ongoing maintenance and they’ll have that pride of ownership in the home.

Joe Fairless: Is that the name of the game with mobile home parks, to not own the mobile homes?

Gabriel Hamel: I’ve seen it done both ways. But I want to own the land and not the mobile homes.

Joe Fairless: You mentioned the reason why – maintenance costs, and then there’s more private ownership. What would someone who has the opposite philosophy say for why he or she wants to own the mobile homes?

Gabriel Hamel: I’ve seen the higher end parks where the homes are newer and in great shape. So they’re able to rent them out at a lot higher of amount and there’s not a lot of that maintenance cost. So the part that I purchased, they’re older units, so almost all the maintenance for the last several years have been when I was digging into the numbers were on the park owned homes. So I think the newer parks and the newer homes – there’s gonna be less maintenance and they’re going to be able to charge a premium for renting it, and they’re owning the unit as well.

Joe Fairless: How much did you buy the 43-unit mobile home park for?

Gabriel Hamel: I paid a little over 1.3.

Joe Fairless: Is that your money, you and partners, or what?

Gabriel Hamel: This one, I didn’t have a partner on. I used to some private money and put about 20% down, and an interest only loan that I will be able to refi out of that. I think next 18 months I’ll be able to add a lot value and refi out and recoup probably most of the money that I put into it.

Joe Fairless: So private money and with 20% down. So is that you borrowed the 1.3 from someone and you paid 20%?

Gabriel Hamel: No, I put down about $240,000 and I had private money to finance the rest of the deal.

Joe Fairless: Okay, private money meaning just investors?

Gabriel Hamel: Yeah, hard money.

Joe Fairless: Hard money. Okay, so hard money lender, got it. So you got a hard money loan on it, and then you put out of your pocket the 20% down, and the goal is to get the heck out of that loan as quickly as possible and to refinance out.

Gabriel Hamel: Exactly. And it cash-flows with that hard money. But I think with making some of these changes it should appraise out based on [unintelligible [00:06:48].26] cap rates. I think it’ll appraise out close to that 2 million mark, and so I’ll be able to get something long-term fixed financing on the park.

Joe Fairless: And your 200K-ish back?

Gabriel Hamel: Yep. Correct.

Joe Fairless: That would be nice. That’s called infinite returns.

Gabriel Hamel: That’s what I’m always looking for, is infinite returns.

Joe Fairless: Yeah. How’d you find the 43-unit?

Gabriel Hamel: This one was actually– a commercial broker had been sending me a lot of multifamily stuff up in Portland. A lot of it was really nice, A and B class stuff. I just said, “Hey, if you see any value-add multifamily or mobile home park, let me know.” They had someone in their office with this park, so I had the opportunity to look at it. I actually drove down there, and the owners of the park were there. So I was able to spend some time with them and really getting to know them and the park a lot better, which made a big difference.

There was actually an offer that came in higher than mine. But I think building that relationship with those sellers really made a big difference. And I’ve done a lot of seller financing deals where it’s been really relationship based and I’m working directly with the seller on unlisted properties. It’s rare to able to build that relationship directly with the seller and in this case, they happened to be there when I showed up at the park. It worked out really well.

Joe Fairless: It’s just a coincidence.

Gabriel Hamel: Yeah, absolutely.

Joe Fairless: Have you since tried to manufacture that coincidence moving forward, since it worked out so well?

Gabriel Hamel: Showing up to a park with a seller there?

Joe Fairless: Yeah.

Gabriel Hamel: Not exactly. I’ve looked at several other parks… The 60-unit park that I backed out of– the previous owner, she didn’t own it anymore, but was actually acting as the property manager. So I was able to look at that property and get a lot information from this property manager whose parents had owned it, and her grandparents had actually built the park. So that was interesting as well.

Joe Fairless: So you’ve got that 43-unit… It sounds like that’s a fairly recent purchase.

Gabriel Hamel: Yeah, I closed on that in June of this year.

Joe Fairless: Okay. Alright. So recent-ish purchase. You got the 43-unit mobile home park, and then you also said you have a 15-unit and a 20-unit apartment building. Do you self-manage all this stuff?

Gabriel Hamel: I don’t manage any of my rentals. So right when I hit the 17-unit mark, I was managing it myself. I had young kids at home. But at 17-units– one night, I was fixing a toilet or attempting to fix a toilet, and I had already considered and factored in property management. I’m kind of handy but not that handy, so I ended up spending my time… And then I had to call a plumber anyway; it’s late at night. So I’m spending my time and money, and then that was really the time I turned everything over to property management. And once I did that, I had a lot more of my time to put deals together. That was one of the best decisions I ever made.

I know a lot of people self-manage and some don’t, and I’m definitely one that sees the value in not managing my own properties. I don’t love it, I’m not great at it. I’m better at putting deals together. And I don’t like being that guy that has to take a security deposit or kick a tenant out for non-payment.

Joe Fairless: The 15-unit and the 20-unit… How are those people performing?

Gabriel Hamel: The 15-unit was a value-add. It was an old building, I partnered on that one. It was a commercial ground floor with two commercial spaces and 13 apartments. That was quite a bit different than many other projects I had done. My partner on it had a crew of guys that did a lot of the work. I put the deal together. He’d been working on it prior, and handed it over to me to negotiate the purchase. That was a big value-add. So all the apartments had to get gutted and restructured because of some egress things that were going on.

Joe Fairless: What was going on with the egress?

Gabriel Hamel: So it was a single-room occupancy originally. So before we bought it, the city came and every code violation you can imagine was going on.

Joe Fairless: Before you bought it?

Gabriel Hamel: Before I bought it.

Joe Fairless: Thank goodness.

Gabriel Hamel: Yep, yep. So we were trying to purchase this prior to that, when people were still living in it. Then a small fire happened, also previous to us owning it. That’s when the fire marshal came in and saw all these violations, kicked all the tenants out. So we’re still trying to negotiate. So now here’s a building that the sellers are trying to sell and there’s nobody. All the commercial is vacant, the residential is vacant… And we went to the city and just said, “Hey, we want to do this. We want to make this work.” We had some ideas and some plans, and they were great to work with. We just sat down and said, “Hey, what can we do? What can’t we do?” So this particular building, instead of keeping it a single-room occupancy, we essentially put a hallway down on the side that we couldn’t put windows into, made that a long hallway, and made a bunch of just neat and oddly-shaped — one two-bedroom in there, but one-bedroom units. It was a great play.

Our focus was the residential. The residential would fully support our financing. So that’s where the majority of our time went. As soon as that was done, we focused on the commercial and got some great tenants on the ground floor there.

Joe Fairless: What type of businesses do you get?

Gabriel Hamel: We have a bicycle shop that had been in another location previously, that wanted to be in this part of town. Then we had a restaurant come in on the larger side of the ground floor, and they’ve done really well.

Joe Fairless: A local mom-and-pop restaurant or a chain?

Gabriel Hamel: Yep. Local restaurant and local bike shop.

Joe Fairless: Okay, cool. What kind of area is this in?

Gabriel Hamel: I live in Eugene, Oregon, and this was in downtown Springfield. So growing up, it was, “Hey, why would you go to Springfield?” There wasn’t a lot going on downtown, and this building was the eyesore. It was the bigger– you see the building on your way into town when you cross the river, and on your way out when you cross the river, because it takes up that whole block. It was an attractive building, but it needed a lot of work. But also, it was in the path of progress. A lot of restaurants and stores from Eugene and local folks were coming into Springfield and opening up restaurants and stores and different things. So part of it was timing. Now, downtown Springfield is a very neat place. People actually want to go down there and hang out and grab a meal. So it’s neat to see.

Joe Fairless: What did you buy it for? How much did you put into it? What’s it worth now?

Gabriel Hamel: Oh, gosh. This was a little while ago.

Joe Fairless: Wait, when was it? When did you buy it?

Gabriel Hamel: So we bought this about three years ago.

Joe Fairless: Oh that’s not too long ago.

Gabriel Hamel: Not too long ago, not too long ago. We had close to a year of renovation, like all said and done. So we bought this in–

Joe Fairless: To the best of your memory. To the best of your memory.

Gabriel Hamel: We were in the 400-range and we put another close to that into it. The renovations were close to what we paid for it.

Joe Fairless: Okay, and what’s it worth now?

Gabriel Hamel: It would appraise out probably close to two million, maybe more.

Joe Fairless: There you go. Do you plan on doing a refi on that?

Gabriel Hamel: Yeah, we actually did. So we refinanced it. My partner and I had some 1031 money so we exchanged a little bit into that. We used hard money for the purchase and most of the renovation. Then we actually did refinance out of it and did a 25 year amortization commercial style loan.

Joe Fairless: I’ve noticed on the two projects we’ve talked about in detail, you’ve used hard money. What are the terms that you’re getting?

Gabriel Hamel: I typically borrow in the low 8% interest only, and a couple of points.

Joe Fairless: Are you making payments on the interest only throughout, or at the very end or?

Gabriel Hamel: It really depends on the deal. On the mobile home park, yeah, right away. On this other project, we actually deferred some of the payments during that construction time. So we actually kept an account aside that would cover that, so that we had some money to focus just on the renovation. Hard money is not something I used starting off for quite a while. I didn’t use any hard money for the first 10+ years of investing.

Joe Fairless: Was that your own money and that was it?

Gabriel Hamel: I was doing a lot of seller financing deals. I started with almost no money. So my first three deals were two no money down and a 5% down deal. I didn’t have a lot of money, but banks were giving loans then. Then in 2008 and ’09, ’10, ’11, ’12, I did a lot of low and no money down seller financing deals. That’s where I really built up the majority of my portfolio. These other two deals were a little bit different than what my focus up until then had been.

Joe Fairless: I forgot how I introduced you with the first thing. I mentioned that you have experience with seller financing and other creative purchase structures. So let’s talk about that in a moment… But on a related note, these last couple that we’ve talked about, they weren’t seller financing or creative structures, although I guess you could argue getting a hard money lender and doing what you did is cvasi-creative. Do you see yourself doing more of the structure that we’ve talked about in the future? Or do you see yourself reverting back to the seller financing?

Gabriel Hamel: I do both. So I try to take a real holistic approach to any deal, and I look at the deal individually and see what makes the most sense for that property. How am I going to get the biggest return on my money, how much money am I bringing into the deal… So it just really depends on the property, what financing would best fit.

Joe Fairless: Okay. So let’s talk about a deal that you’ve done with seller financing and why you chose that versus hard money and your own money with a down payment.

Gabriel Hamel: So my very first seller financing deal was the deal I found on Craigslist, and they were offering seller financing. I had been looking for seller financing. The reason I did that without bank loan or hard money is because I did not have the funds or a job to get conventional financing.

Joe Fairless: Were you in the military?

Gabriel Hamel: I was, yeah.

Joe Fairless: Okay. So I guess this is post-military.

Gabriel Hamel: It is. I was deployed to Iraq in 2003 and 2004. I came back, bought my first house in 2005, another one in 2006, and another one in 2007. That was all with bank financing. But a bank would approve anyone then. So I still bought smart, even though it was a hot market, and not great loans. I still have those houses today and they’ve done well. But I realized quickly a couple hundred dollars a month of cash flow per house would take a lot of single family houses to build up enough cash flow to live on. So my first seller financing deal was two duplexes side by side, four units. I put twelve and a half thousand down, and I got a lot of that back with deposits and prorated rents at closing, so it ended up being less than that… And the thing cash-flowed. So like all the things that I said before – poorly managed, under-rented, deferred maintenance, and it had all those things. The sellers were great people that were just tired of managing property, and so they were happy to sell or finance the deal. It was terms that were favorable to them and favorable to me. It was a true win-win scenario.

Joe Fairless: Out of all your deals, which deal have you lost the most amount of money on?

Gabriel Hamel: I have never lost money on a deal.

Joe Fairless: Props to you. Which one’s been the least profitable?

Gabriel Hamel: The least profitable – I partnered on another single room occupancy property about an hour South of me. I partnered with the same person I partnered on this other partner with, and I partnered with the lender. Long-term, it’s going to be fine. It’s a property that had a bad reputation and we ended up having to do a lot more work up front. It’s taken a while to really change the image of this building. Long-term, it’ll be fine if we keep it. If we sell it, I think we would make some money and do okay there. But it has not been as profitable as we anticipated. The expenses with the earlier renovation than we anticipated has costed not to perform as well.

Joe Fairless: What aspects of the expenses creeped up on you?

Gabriel Hamel: We had early vacancy. By the time we closed on it, some tenants had moved out. We had a commercial tenant that wasn’t paying. All the rents were low, being that it was single-room occupancy, but it also was really hard to get because it had a bad reputation previously for drugs and transient traffic coming through there to just really change the image of the property. So interior painting every time a tenant moved out, exterior painting we’ve done recently, and just some upgrades that we plan to do, but not as quickly as we did.

Joe Fairless: Based on your experience, what’s your best real estate investing advice ever?

Gabriel Hamel: My best real estate investing advice ever, I’d say network, build relationships and let people know what you’re looking for. If people don’t know what you’re looking for, how are they going to find you? How are they going to bring you a deal? Lastly, I’d say do the math, know your market and trust your intuition. I think math and intuition goes a long way in this game.

Joe Fairless: We’re gonna do the lightning round. Are you ready for the best ever lightning round?

Gabriel Hamel: I’m ready.

Joe Fairless: Alright, let’s do it. First, quick word from our Best Ever partners.

Break: [00:19:32]:00] to [00:20:08]:03]

Joe Fairless: Best ever book you’ve recently read.

Gabriel Hamel: I have two of them. The Big Leap by Gay Hendricks and Can’t Hurt Me by David Goggins.

Joe Fairless: What’s a mistake you’ve made on a transaction that we haven’t talked about?

Gabriel Hamel: A mistake on a transaction we haven’t talked about… Not digging deeper into my due diligence.

Joe Fairless: Will you elaborate?

Gabriel Hamel: I think when you get a proforma from, say a broker, and those numbers don’t always add up. Now, I’ve been okay with– now I’ve had enough experience to really dig into those, but I think a lot of properties look great on paper, and once you really spend some time and dig into those numbers, they don’t always add up to what you’re really being sold by the broker.

Joe Fairless: Best ever way you’d like to give back to the community.

Gabriel Hamel: I like going to lunch and meeting up with people who are excited about building financial freedom through real estate or already started on their journey. I really enjoy just that natural coaching and mentorship.

Joe Fairless: How can the Best Ever listeners learn more about what you’re doing?

Gabriel Hamel: The best way to get a hold of me would be either through Instagram or on my website at hamelinvestments.com.

Joe Fairless: Thank you so much for being on the show. Well, we talked about in detail the 43-unit mobile home park, the value that you added and the business plan. We didn’t even talk about the 60-unit. Shoot! Real quick, I want to learn more about the 60-unit. What were some specific things that made you want to pull out of the deal?

Gabriel Hamel: On the 60-unit, the biggest reason I pulled out of the deal– and it’s going back to that proforma… They’ve built a beautiful proforma based on their highest month rent and their lowest expenses. The more I dug into the numbers, and the more documentation I got from the seller and the property manager, things just really didn’t add up. There was just too many questions, and the numbers – their rent amounts didn’t add up, the expenses didn’t add up. There were just so many red flags. I tried hard to make it work, and it’s not something that was going to force. It wasn’t a good purchase.

Joe Fairless: They weren’t flexible on the purchase price or terms?

Gabriel Hamel: By this point, no, they weren’t.

Joe Fairless: Well, thank you for sharing the reason why you pulled out of the deal, as well as the deals that have gone well. We touched on a little bit of seller financing, but really the focus was on the larger deals. Thank you for going to Iraq, serving our country and keeping us all safe. Really appreciate you sharing some time with us. I hope you have a best ever day and we’ll talk to you again soon.

Gabriel Hamel: You too. Thank you very much. I appreciate it.

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