Hello BP'ers -
We are currently underwriting a mobile home park with all park owned homes.
>>>The homes are in bad shape and the repairs line item eats 1/3rd of the Gross Income!
Does anyone have any tips or experience in 'gifting' the units to the current tenant?
We thought of rehabbing some units then selling them on the open market. They are prehud homes and in need of a lot of repair and thought maybe gifting would be a quicker route to reducing this repair line item + current owner pays water, trash, and sewer!
>>>any comments are welcomed and appreciated,
@Ken Buck I like the idea in theory. My gut reaction would be not to do it. People who get things for free never have any personal investment/buy in with it. This might cause a struggle with value in you other homes. The new “owner” would have no personal ownership really.
If the person is also cash poor, they couldn’t afford the fixes it would need anyway and then you are adding dilapidated properties to your area. I would ask myself what kind of clientele am I wanting to attract or keep? Anyway, just my 2 cents. Best of luck!
I would not do it. Sometimes it works, but many times it doesn’t. They need skin/blood in game or human nature occurs.
Yes it would reduce your expenses initially until they move out and now you have an inhabitable home that needs even more repairs or demolished.
You need to figure out which tenants are capable of receiving this gift and layout a repair schedule if they accept. Be realistic and give time to complete task, as they may not have a bunch of money to put towards items this will take time.
Another option is similar and advertise them as handyman specials, and do the same repair schedule with them. Once again main items (roofing, floors, water/sewer, doors/windows, heat). Check your state laws.
Best option may be to fix and flip them. That way people have skin in the game.
@Ken Buck This would be tough to do. If they're long term tenants, maybe. Though, there will still need repairs done to the homes. If they cannot make the repairs and have hard times like losing their jobs, it may make the situation worse if they actually own the home.
It may be better to look into the costs of replacing these homes with newer ones. Good luck!