Mobile home park investor community
Tucson, AZ · Member since 2017 · 23 posts · 16 votes
@Brian Mitchell, we're building a portfolio of MHP's to complement our multifamily investments. We've been pursuing MHP's for about 10 months and have two under contract. It will continue to be our focus for the foreseeable future. While we still like multifamily, it's been very difficult to find value. Besides, we just really like the dynamics of the MH industry. We look nationwide for parks while avoiding the west coast, Florida and New England. Our website describes a bit more about what we're doing with MHP's: www.LJCommunities.com
I lived in Tucson for 4 years while attending the UofA and would love to own more parks in the southwest. In fact, I'm traveling to Texas this weekend to connect with a few owners in DFW and San Antonio. I don't have any other MHP events/conferences on my calendar for 2018 but it would be great to see you at a future MH event. The MH owner community is a great group of collaborators, educators, and connectors. Reach out to me any time.
Hello everyone! I have been a part of BP for awhile now and although I have met a handful of you, I have not made a formal introduction to the MHP owners, sponsors/syndicators, and fans of mobile home parks here on the platform. My partner and I own several MH/RV parks in the state of Arizona and are focused on the creation of recession resistant cash flow for our investment fund. Through that recession resistant lens, we are carefully acquiring value-add mobile home parks and RV parks here in AZ and intend to do so for the next decade.
To respond to some of the questions on this thread and add some value to all of you, here are some of the items we have found to be important:
Acquisitions - We prefer to develop relationships with owners of parks that are not for sale in the markets where we would like to acquire parks. This strategy requires a lot of hard work and patience, so it is not for the faint of heart. Many times the relationship will require several years to mature before a conversation about a transaction occurs, and sometimes it simply doesn't occur at all. This doesn't discount the relationship with local brokers as an alternative strategy. Just keep in mind, with brokers you are not the only buyer on the list.
Key Criteria - Location, Location, Location. There are other key criteria, but none are more important than location. This is especially important with value add parks where you are intending to fill spaces, sell homes, and raise rents. Buying a park in a poor location will cause more struggle and brain damage than it is worth, even if the price seems right. Buying in the right location with proper market demand will allow you to hit your projections, or better yet exceed them. Make sure to do a thorough market demand study and stay away from small towns that are not growing or producing jobs. (Hint: Follow Walmart - their customers tend to be your tenants)
Conservative Underwriting - Leaving some "cookies in the closet" is a phrase my partner refers to when we are underwriting parks. The idea is not to stress the underwriting to the point that everything has to go your way to make the deal successful. We all know there are surprises that come up, so make sure to leave some cookies in the closet to account for those surprises. Ask yourself questions like: What if we can't raise the rents as fast as we predicted? What if we can't sell homes at the pace we pro forma'd? etc. By being conservative, you can always go to the closet for a cookie if an unexpected event occurs, or if the pace turns out to be slower.
Due Diligence - I have shared more thorough content on this topic here on BP, so feel free to view that on previous threads I have responded to. In general we like to take a measured approach that breaks up the DD into 4 areas: financials, initial walkthrough, compliance, and paid inspections/services. Begin with the items that require just your time, but not money. First, review the financials to determine how the park is currently running and to uncover the potential inefficiencies. Then do an initial walkthrough and inspection of the park so you know exactly what you have. If everything is still a go at that point, spend time on the compliance to make sure there are no deal killers. After all that is complete, then it makes sense to spend money on the inspections, surveys, contractor bids, etc. The idea is to only spend money on deals that have passed all the initial inspection requirements and are highly likely to be a deal.
Operations - First of all, 3rd party management does not work, particularly on value add deals. That may be a bold statement, but the truth is nobody cares about the performance of your park like you will. Take the time to create a proactive asset management strategy that will allow you to keep your finger on the pulse of your park performance, and to ensure that you are constantly moving the needle toward the goal of each park. If you don't have an asset management strategy, I would encourage you to read the book called "Traction" by Gino Wickman. The book outlines the architecture to create or transform a business and IMHO is the best outline to create success in any business. With this architecture in place, we have managed to outperform the projections on every park we own, including the parks where we encountered the most challenges. This asset management strategy requires commitment to weekly meetings to ensure you remain focused on the goals for each park, that everyone is hitting their numbers, and that you address any issues that may come up.
Communication - This item is for my fellow sponsors/syndicators here on BP. If you want to create raving investor fans, it is extremely important to be proactive about communication. Create a communication plan that includes timing for regular communication, quarterly reporting, timing of distributions, and delivery of tax documents. Coordinate that plan with calendar events so your investors can set the clock by your communication. Be extremely proactive and deliver on time. What we have found is that those who take the time to create this communication plan in advance are the ones who create the best investor experience. Those who don't will not receive investor referrals and are the ones who tend to deliver a poor experience. Remember, part of the overall yield you can deliver includes the "emotional yield", which is created by the "best experience" you can create for your investors.
Finding, acquiring, and operating parks is not easy, but with dedication, a conservative approach, and intelligent decisions, this is one of the most recession resistant strategies that exists. And doing it extremely well only makes it better.
All the best,
Jack
@Colin Smith: Show stoppers for us are lagoons and well water. Not impossible to work around or deal with, but will require some extra due diligence and awareness of what you are getting into. We don't look at parks with either of these. Our other show stoppers are related to the surrounding community, i.e., what are the unchangeables? How big is the MSA/DMA (essentially what's the market size)? How is the underlying economy? Is employment diverse or tied to one industry/company (i.e., any towns near the oil fields of western North Dakota can be risky...the region is heavily tied to the strength of the oil market which can be great when everything is going well, but can get ugly quickly when the oil market turns)? Is the park in a flood plain by a river? Is it by a major river that floods often (i.e., spring flooding of the Mississippi river can be and has been devastating to anything in it's path)? Our other park criteria are more preferences than showstoppers: Are utilities individually billed or master billed? How may park owned homes are there? Are lot rents at or below others within a 20 mile radius? Hope that helps...
Regards,
Rudy
Hello. I'm Kitt Pyle. I'm a newbie to real estate purchasing. I was trained by RE Mentor, David Lendahl, out of Boston. He trained us to purchase MF homes and apartments. However, while looking for our first apartment complex, I started seeing MHP and RVP's. They attracted me more than purchasing an apartment complex. Self-storage is the other real estate that has caught my fancy.
Needless to say, I'm very interested in acquiring a property. But as a newbie, I would like to have an experienced person alongside to help me avoid some very costly mistakes as I pursue the acquisition of one or both of these types of properties.
We have been using the BiggerPockets Rental Property tool to do a preliminary analysis. Is this the best tool? Should I be analyzing MHP/ RVP the same way I would analyze an apartment complex? Any suggestions on better ways to analyze MHP/RVPs?
I would ask the same questions for self-storage, too.
@Kitt Pyle There is so much to learn in the MHP world that it can be overwhelming... If you're looking to be in the MHP world long term it would be wise to invest into some foundational training/learning. I personally like Frank Wolfe's course at MHP University. Aside from that it would be best to partner with a broker who specializes in the field (as you mentioned).
As far as analyzing MHPs- the similarity with apartments is that you are ultimately looking at your income and expenses and what your return will be. The difference really comes down to knowing the why and market rate for each number. Here are a couple of pointers and things to look out for (Note: this is very incomplete):
Income: Ensure actual income is used and not future rent rates (unless notices have been sent). If the owner has plans on raising rents next year, its not actually earned income today. Specific income from any park owned homes is not capitalized, this should be factored in as more of a bonus.
Expenses: Vacancy factor is included- even if there is a 100% occupied park and a waitlist. Know what the market rate is for for each expense, each line item should evoke a thought.
For example, I just analyzed a park that had an actual expense of $8,400 for septic repairs/maintenance. At first glance I can look at this and automatically know this is high. A comparable park I analyzed last week has a similar well/septic combo had an actual septic expense of $1,200 (this is low).
Knowing that it costs around $1,200 to pump a small tank, my thought was that this individual park possibly had a tank down.. and when one goes out it can be a domino effect. On the other hand they could have just serviced their tanks in prep for the sale.
Overall I would say 1.) Invest in learning 2.) Become familiar with the costs and income in your area. Income: what are the going rents, price per space, cap rate etc. Costs: taxes, insurance, water, garbage, electric, maintenance, manager salary, workers comp, office, legal, reserve for pumping etc. 3.) Run the numbers with different scenarios/what you would feel comfortable with (what would the return be if you raised the rent? Had to replace a septic tank? higher vacancy than listed etc.) If the numbers work out then go for it!
Hope this helps!
Thank you. That is helpful. I have been running numbers and looking at various places. Yes, I've started reading some of MHP's material. As you said, there is so much to learn! I've been using this time to study and look at possible deals.
A burning question, though, is should MPH and RVP be analyzed using the same tools as apartments?