Block of trailers owned by an outside company

7 Replies

I'm looking to offer on a park that has solid numbers, upside potential and appears to be in very good shape. The big hair on it is that the rent roll shows an outside company own about half the trailers. I asked the seller about it, and he said that the company pays lot rent and then rents out the trailers to tenants of their own. Obviously, the thought of the outside company moving all its trailers out is a bit disconcerting, though I realize it would take a pretty penny to do so. (We're talking 18 trailers.) But what else do I need to be thinking about in considering if this risk is acceptable (for any price)?  

@Nolan O. I think if that guy is cash flowing he won't go anywhere. Your only fear is yourself jacking up the rents on him. Also think about this.. he needs to transfer all his mobile homes to another site and take all of his tenants with him. That's not easy to do. As long as you keep your lot rents on par with other local parks it will not be feasible for him to move.. Good luck

Risk is they refuse to comply with rent increases etc. placing them in control of your community. They may also not allow you to screen their rental applicants. Far too much risk of them using their numbers to bully a community owner.

I personally would not take a chance investing in this community.

I wouldn’t do it. IF 18 MHs left that park I would not be happy. Granted it would be expensive for them to move those homes out, still a risk. I don’t like risks like that. 

I completely agree with @Hai Loc.  The cost to move the trailers plus the risk to them that the tenants would want to move to the new location mean that it is not likely the block owner would do anything.  I would do two things...get it under contract and then go talk to the block owner during DD.  Tell them you plan to get your lot rents in line with market rents and see what they say.  Depending on the uptick in rent to market levels, maybe offer him small volume discount to keep him below market if they keep all the homes there.  I don't see how he has any potential to be in control of your community.  

So much for letting the Internet make major investment decisions for me :P Seriously though, thanks for weighing in. It's helpful to see different lines of thinking on the topic.

@Nolan O. It's possible. Though it will depend on your ability to get along with the outside company. If you tie it up, you may want to put that down as a contingency. Really depends on your risk level. Good luck!! 

@Nolan O. Having the constant worry of this company moving all their trailers out of the park causing a terrible vacancy is just not worth it, in my opinion. With the parks size on top of that (18 trailers) it would increase the problems you face with such a vacancy. If you had a big park, with say 100 trailers, and this compnay owned 8 trailers and threatned to leave, you could fill those lots easily and not worry that it would destroy your profit.