1st Manufactured/Mobile Home Park Endeavor Underway!!!

19 Replies

We got started in Real Estate Investing about a year ago when we realized that my husband had six years until he was retirement eligible. We started off with 2 SFR's that are doing well thanks to our friends at STOREHOUSE 3:10, but decided that in order to meet our ultimate goal we needed to scale up sooner rather later. We are now approximately 2.5 months into our first multifamily investment. We purchased a Manufactured Housing/Mobile Home Park in Indiana. It is in rough shape and needs a lot of TLC and organization. Here are the particulars:

Purchase Price: 220K

Down Payment: 30K

Seller Financing:  6% Interest Only, no payments first 6 months, 2 year term

21 existing LOTS and 1 SFH

7 Vacant Lots/3 TOH's/11 POH's 

City Water/City Sewer

Value Add Strategy: Install Submeters and bill back for water/sewer, improve the curb appeal through landscaping, and road/gravel driveway repair, renovate vacant trailers and sell or Lease w/Option, Renovate SFH and increase rent, infill used trailers to fill vacant lots. Goal is to get occupancy to 80% in order to support a refinance.

Current Struggles: Initial contractor has not performed to our liking. Currently trying to find a way to off ramp contractor and find a replacement. Finding capital to bring in new homes and renovate the SFH (current condition is worse than we originally budgeted for). Enforcing new park rules and regulations which is partly due to not having a property manager yet, which is a struggle itself. In the process of evicting a tenant (inherited from the previous owner).

We appreciate any comments or feedback.  We will keep everyone posted along the way.

@Stefani Gillenwater

Congratulations on taking a timely action and planning for retirement! 

Here're a few of my suggestions:

1) In terms of your struggles, while you're searching for a new PM, have you thought of identifying a reliable tenant and asking them to take a temporary charge for a temporary price break. Talk to the prior owner if you have closed with them on good terms and see if they could recommend one of the tenants. If not, running background and credit checks on all tenants and going through the rent roll should give you a good picture as to who can help. 

2) When it comes to financing the new homes and reno costs for SFH, think creatively in terms of the options:

a) borrow against your existing 401k (up to $50k)

b) do you have a enough equity in one of your existing properties to pull a HELOC out

3) private lenders or HML

4) bring a partner on board

If you would like to talk about any of these options, or need my help further, feel free to PM.

Best!
further

Thank you for responding, Alina. We did consider asking a tenant, but at this time there is no tenant that we would trust. Also, with Indiana, I believe a PM has to be a licensed real estate agent so we are trying to be cautious with that. We reached out to a local real estate agent and received a recommendation that we hope will work out!

As to the finances-we did just complete our first BRRR attempt yesterday. While we did not end up getting all of our money back, we did get most (gotta keep trying!). That will help us continue with the MHC rehab for now!

Thanks again for the tips!

@Stefani Gillenwater  

Congrats on taking the first step and purchasing your first park!

It sounds like you've realized a lot of opportunity with this park, I looking forward to hearing the results once you get it turned around.

As far as the licensing requirement for the property manager in Indiana, the state does provide an exemption to the licensing requirement for a full-time, salaried employees of the owner or lessor the real estate in question. Not sure if you could use this exemption to use your advantage regarding employing a tenant to manage the park, but it may be worth some consideration if you can make it work. 

Hope this helps!

Would you necessarily need to consider the person a PM or could it just be a grounds keeper? The park that I'm looking at purchasing just has a tenant that mows, plows, and would let me know of any issues. I'll open a local bank account and have them all deposit their rent automatically or pay online. Maybe just have the grounds keeper and then hire a realtor as needed for bigger things?? Good luck! :)

UPDATE!!!!

Just wanted to give a quick update.

1. Hired a local property manager to assist with showing units, rules/regulation enforcement, etc... This by far has been a worthwhile investment. Huge peace of mind having someone you trust who can put eyes on almost daily.

2. Have increased occupancy from ~23% to ~35% in the last 2 months. One more renovated unit to get filled then should be breaking even.

3. Sub metering in progress this should be a huge impact to NOI. We did offer a discount to the existing tenants to help ease the burden of a new expense but not sure how long to keep the discount (we waived the 70.00 per lot fixed sewer fee).

4. Have run into some issues with the previous owner not disclosing some state inspection discrepancies that were not corrected. Bottom line the state wants us to correct them but we feel this could be a breach of contract. More to follow as that develops.

Thanks for the support everyone. Will report back in a few months with an update.

Stephanie, nice work on pulling the trigger. I’m about 5.5 yrs out from retirement and am thinking along the same lines as you. Are you owning/managing from a distance?  I’d love to pick your brain on those challenges and tips. 

Regards,

Mike

@Stefani Gillenwater congratulations on raising the occupancy! It seems you and your husband really found a diamond, albeit still dirty and rough around the edges currently. Do you happen to know the pro-forma numbers and/or the ARV on this park? I'm in the lending business and I may be able to help you figure out some options related to refinancing out of the interest-only 2-year term you have currently. If I'm not able to offer some help maybe I can put you in touch with a few people that may be able to help.

I look forward to future updates, and the best of luck to you and your husband!

@Stefani Gillenwater

CONGRATULATIONS!

Great job for pulling the trigger. I am looking for a Mobile Home Park in Indiana but I’m open to other areas. Thank you for sharing your honest assessment of what is going on and how you are attempting to work it out including seeking help on this forum.

It helps out the rest of us know that we can do it too despite the challenges we know could and will happen.

This reply is more encouragement and kudos to you rather than advice. Please keep going- you can do this! My husband and I would love to look you up when we’re in Indiana next.

Originally posted by @Marijuana (MP) Vandyck :

@Stefani Gillenwater

CONGRATULATIONS!

Great job for pulling the trigger. I am looking for a Mobile Home Park in Indiana but I’m open to other areas. Thank you for sharing your honest assessment of what is going on and how you are attempting to work it out including seeking help on this forum.

It helps out the rest of us know that we can do it too despite the challenges we know could and will happen.

This reply is more encouragement and kudos to you rather than advice. Please keep going- you can do this! My husband and I would love to look you up when we’re in Indiana next.

 Thank you for the encouragement and that is awesome your looking for a park.  If you need a broker let me know and I can share our broker's info.  What exactly are you looking for?  Will this be your first park?  How far are you from Monticello, IN?  

Originally posted by @Stefani Gillenwater :

We got started in Real Estate Investing about a year ago when we realized that my husband had six years until he was retirement eligible. We started off with 2 SFR's that are doing well thanks to our friends at STOREHOUSE 3:10, but decided that in order to meet our ultimate goal we needed to scale up sooner rather later. We are now approximately 2.5 months into our first multifamily investment. We purchased a Manufactured Housing/Mobile Home Park in Indiana. It is in rough shape and needs a lot of TLC and organization. Here are the particulars:

Purchase Price: 220K

Down Payment: 30K

Seller Financing:  6% Interest Only, no payments first 6 months, 2 year term

21 existing LOTS and 1 SFH

7 Vacant Lots/3 TOH's/11 POH's 

City Water/City Sewer

Value Add Strategy: Install Submeters and bill back for water/sewer, improve the curb appeal through landscaping, and road/gravel driveway repair, renovate vacant trailers and sell or Lease w/Option, Renovate SFH and increase rent, infill used trailers to fill vacant lots. Goal is to get occupancy to 80% in order to support a refinance.

Current Struggles: Initial contractor has not performed to our liking. Currently trying to find a way to off ramp contractor and find a replacement. Finding capital to bring in new homes and renovate the SFH (current condition is worse than we originally budgeted for). Enforcing new park rules and regulations which is partly due to not having a property manager yet, which is a struggle itself. In the process of evicting a tenant (inherited from the previous owner).

We appreciate any comments or feedback.  We will keep everyone posted along the way.

I feel your frustration I was managing a park almost 400 miles away. I made trips every month. Not having a PM is a nightmare. I finally have new management in place after about 11 months. In the meantime I was overseeing my parks with contractors and local tenants helping me. 

You should have an onsite park manager. Your park is a bit too small to hire a fulltime person just to do management. It should be someone can collect rent, make deposits, file notices and evictions as well do some grounds keeping and maintenance. And hire part time workers who can help with maintenance.

Your goal should be selling off those existing POH so the tenants can do their own maintenance and all you do is collect lot rent..    spend some money to bring in used homes to and seller finance them out to new tenants to fill those empty lots..  Have your park fully occupied with TOH.. collect lot rent and sip margaritas 

 Good luck

@Stefani Gillenwater

Hi again!

Thanks for your reply! We are about 3.5 hours from you. We have family in Indiana, my mother in law was just moved to a nursing home facility there, and my son is graduating from high school next year so... it’s a great time to go!!!

We are looking for a smaller park (under 50 spaces) that we will own/operate ourselves starting out so YES- please share your broker’s info.

UPDATE!!!

Well I wish I had better news.  We have ran into a myriad of issues but continue to persevere.  Key issues have been:

1.  Mysterious Water Leak (estimate 200-300K Gallons a month):  Have had leak detection - NO LUCK, Sewer Camera Inspection (ensure water wasn't draining into sewer) - 95% confident it isnt, 2 Main Water Leaks repaired - stabilized water usage but still 200-300K gallons unaccounted for.  NEXT STEP:  City has agreed to change out the meter and see if that is the issue.  There are not visible indications of a leak anywhere.  If new meter doesn't work the local contractor has recommended installing 3-4 isolation valves to help narrow down potential area of concern.  Anyone have any experience in this or recommendations?

2.  2 Mobile Homes have had signficant structural damage of which 1 we can fix but the other will cost more than it is worth to fix.  Will be scrapping it.  

3.  New property manager/handyman has been great.  Charges a decent amount for handyman/rehab work but finally someone we can count on.

4. Previous contractor sub'd out furnace installs and just recently found out those furnaces are not HUD approved so in the process of switching them out.

5.  Multiple issues with tenants violating their leases but our NO PLAY NO PAY NO STAY policy is somewhat working.  Just challenging to be extremely strict when we do not have the occupancy at a point where it can absorb it.  

6.  Will be selling 1 Home on contract so that is good news.

7.  Had one home develop significant leaks (this highlighted the failure of our previous contractor to coat the roof adequately).  Problem now is the temps are to cold to fix so currently had to tarp the roof to prevent more damage.  Have plan for new handyman/contractor to coat roofs once over 40-50 degrees.  Anyone know of a product that can be applied in under 50 degree weather?

8. SFH was vacated (buying the Mobile Home on contract mentioned above). Home is in need of serious work.


All in all we are trucking along but some poor decisions on contractors, missed items on due diligence, and new issues have drained our rehab capital.  

Options are to:

1.  Keep pressing and continue to rehab, fix water issue, and increase occupancy with hopes to stabilize the park.

2.  Turn it back over to the previous owner who is carrying the note.  

We appreciate any and all comments/advice.