I recently started attending our local rei meetings again and vip member had a bunch of deals in Ohio. I am in Southern California, but after listening to the last 2 years worth of podcast last month while painting 3 walls of my house twice (before hiring it out, not good at this) I started looking at out of state investing. When I saw a 13 cap on the park, and Brandon Turner and Mindy Jenson just did one and seem to want a bunch more, I got excited. I read a bunch of posts last night and thought it over today and bugged my cousin that does commercial loans.
Anyways, I started going through the checklist https://www.biggerpockets.com/renewsblog/2013/04/26/mobile-home-park-due-diligence-checklist/ and I will ask for answers on the sewar situation, and try to get the last 3 years of rent roll and PL statements. Not sure how to check on zoning and maybe the city trying to push out parks. This one seems to be surrounded by houses when I found it on Zillow.
I was skeptical on some owner financing at 6 to 10 percent after I bring in 25% or so until reading that mobile parks are hard to get coneventional or commercial lending on. I sign on a HELOC tomorrow for enough to cover the whole park at 5% from bofa ( my buy and hold I am in still) . So now that owner finance offer makes sense and checks out from what I read here.
The park owns 13 of about 25 mobile homes, it is at capacity and has had some improvements over the last year. Not sure on the exact reason they are selling and I am hesitant. Small park, so I guess that is why the cap rate is so high from what I read to attract buyers as larger parks get more interest. This park with the mobiles included costs less than a condo where I am but seems to cash flow like crazy.
Any words of wisdom, or advice. We have a few guys that love mobile I can take to lunch and take their class if I buy this to become more informed. They talk about their Lonnie deals, etc and sell their 10% notes on some trailers. I have been going off and on to those meetings for 2 or 3 years.
I am leaning on pass as it is so far out of my comfort zone, but I need to do something eventually in RE so should this be it?
Updated almost 3 years ago
Mindy Jensen, spelled her name wrong sorry and now can’t fix
well, with me financing 100% of $249,900 at 5.03% makes my payments around $1341.52 a month for 30 years. So my yearly debt service is $16,100 ish, and with a NOI of $31,900 my cash flow is $15,800 a year not accounting for increases in rent for the 30 years, etc.
Seller finance amortized over over 35 years at 10% and a 7 year term means I have a huge balloon payment $146,000. That does not seem great at all. Also means I only cash flow $16,436 - $12,000 ($90k @ 5% over 10 years to pay my HELOC) = $4,436 a year and I have to pay the $146,000 balloon at year 7.
At least I have numbers to play with in the rental calculator now.
Hey Paul, I was talking about Andy and you of course. This was a deal that a dude at the last meeting had. I just have to find how to finance it now so I don’t have to give up leverage and 100% finance it myself.
@Phil Collett , Hey Phil. If I were you, I wouldn't invest in an asset you are unfamiliar with so far from your home base unless you had someone in Ohio you could trust to keep an eye on things. I live in North Carolina and own 7 parks currently. I try to keep them within an hour or so drive. Most parks are lot rent only, but for the ones that I own trailers in, I have local property management companies handle these. Most property management companies won't advertise managing mobile home parks, but if you call around and talk to enough of them, you'll most likely find one that will.
I've done very well with parks and returns are so much higher than other assets I have. Good luck to you and let me know if I can answer any questions!
the long distance thing I am getting more comfortable with. The park is full, under property management that is at 9% under a group contract by a turnkey provider out in Ohio. The numbers cash flow even at 70% rented so, yeah, the park does make some money (rental tool analysis with 25% at 5% over 10 years heloc, and 75% at 7% over 20 years conventional....may be unrealistic rate or terms on the 75%). Losing property management or bad property management would ruin this for sure as I am guessing the systems to run a park are a whole other world than a multi family with different dynamics. The turnkey provider is half time in Ohio, and I guess half out here in cali; seemed to be in good standing with the rei heads here, who have gained my trust over a few years as they aren’t the hard sell guru guys.
I am waiting for the last 3 years numbers so I can look at finance options so I don’t have to use all my cash and can get leverage Because without leverage it is not as attractive since I’m not getting built in equity and the park has been stabilized it sounds like over the last year. Otherwise I will just continue looking at turnkey flips in Texas.
@Phil Collett Definitely find out why they're selling and do more research on the neighborhood. Before you get into any deal, you want to know what type of neighborhood you're buying and the types of clientele it attracts. From there, you'll have to figure out if you can work with the types of people the park attracts. I learned this lesson the hard way. Good luck!!
Thanks Rachel, when I ran the address in Zillow when I first evaluated the deal it showed the schools were actually in the 7 and 8 range, which tells me it is a decent area. I never got a response for my request for 3 years of rent roll, so either the deal sold or the numbers are not good. And I know the parks can be a different experience and if I lost property manegment I might be screwed unless I sold to the park down the street.
I figured some of the commercial loan details out after talking to a cousin that does commercial and also looked into sofi etc as alernatives for the next non residential opportunity.
May I ask where in Ohio and who is the management company? I have a park near Ohio with on site management so wondering if it makes sense for me to talk to them. Thanks.
@Patrick McKenna - the small park is in Massilion. I don't know the management, but I can provide Rob's info who does turnkey out there and was representing the seller. Shepherd Advisors, LLC. realestatesimplified.com, I guess I can't post emails or phones.
Once I have some money back from private loans and my rentals refinance I will be talking to him again about other duplexes he had.
Hi @Phil Collett I live 10 minutes north of Massillon. I've lived in the area all my life basically. I own several small multifamily properties in the are as well. If you need a hand let me know. I'm in the market for some parks as well. I'd love to hear about some deals from your guy in ohio.
But seriously if you need a second opinion or someone who can drive through and give you an idea of the area I'd be happy to help.
Sounds good @Matt Kauffman !