Hey guys! So I’ve been interested in MHP investing for quite some time now, and in the light of everything going on, they seem to prove even tougher as an asset class than ever before (in a good way), with massive loads of people losing their jobs and searching for bottom-line affordable housing.
So with that being said, if you’d be willing, I’d be interested to hear how others got started in the business. Details of the first deal, successes, failures, etc. Feel free to share whatever you’d like!
First deal: Glenhaven, Dallas, Texas. Bought for $400,000 with $10,000 down and seller carried $390,000 for 30 years. Sold for around $1.5 million about seven years later. Lessons learned from that deal:
1) Don't buy master-metered gas (when it failed I solved it by bringing in propane tanks).
2) Manage master-metered electric very carefully (didn't even know what it was until the whole power system lit on fire one day).
3) No pay/no stay is the only way to go on collections. Nothing else works.
4) Inject a "pride of ownership" into your residents with immaculate common areas and they will take the ball and run with it.
5) Don't let city officials push you around -- find a good municipal lawyer and your problems are suddenly solved.
6) A successful mobile home park is like a high-density subdivision in which the neighbors watch out for each other and have a strong sense of community.
7) NEVER rent mobile homes -- sell them at whatever price you can get and focus STRICTLY on the land rent.
8) Smart owners copy what other successful park owners are doing verbatim and bad owners try to be pioneers.
9) Think like a lender and you will always be successful (my happiest moment was when I got a conduit loan on Glenhaven as that confirmed that all my steps had been correct).
10) Don't listen to your friends, family and peers when you buy a mobile home park as they will all say you're nuts.
@Frank Rolfe Thanks so much Frank! I heard your BP podcast episode and also have checked out MHU! It’s awesome to hear from someone as successful as you.
Mobile home park owners are like people who restore old cars -- they're weird and they like talking about what they do. People just recently started caring about this real estate sector (after 50 years straight in which nobody cared). I participate on BP because it's always fun to talk trailer parks. Mobile home park owners treat everyone the same whether they own 1 or 100 properties -- that's what makes it interesting. It's a culture that's both bohemian and egalitarian. If you're interested in mobile home parks -- even if you don't own one -- you're already a member of the club whether you like it or not.
@Frank Rolfe Love that! Thanks man!
How awesome! You ask for experience and you get one of the most experienced in the field! I have also been looking into mhps and devouring all the content I can find from @Frank Rolfe and @Jefferson Lllly. I hope this post continues with even more people sharing their experiences.
I can't hold a candle to Frank's experience, but this is where we're at currently:
My wife and I purchased our first park in August of 2018, just outside of Chattanooga, TN (MSA 550,000). We found it on the local commercial MLS but the broker was willing to let us talk directly to the owners. At the time, it had 17 of 50 lots filled and paying - all but 4 were run down POH. There were additional homes on the property that were not rentable or producing income.
We used the owner's existing local banking relationship to rewrite a fully amortized loan (15 year, ugh) on the main portion of the park. I'm still amazed they wrote this given the occupancy, but they were already liable on the loan so that helped. The seller carried a 3-year interest-only loan on an additional adjacent lot (part of the 50 MH lots) that we're developing and adding homes to currently.
We've raised lot rents to market on our few TOH with some intended turn over ($0 to $250 is a big jump). Most people living in a POH have been converted to rent credit or leases with an option to purchase, along with rents being moved to market pricing. We've sub-metered water and as of this month moved from a dumpster to poly carts that the residents pay for each month.
Revenue started at $6,800/mo and we're now collecting about $14k/mo, not including trash and water bill backs, on 29 occupied lots. We're still pretty heavy on POH but slowly moving them off the books.
We're starting the process to refi the package together within the next year to pay off the seller and our friends and family investors who came into the deal with us.
A few lessons learned:
1. Go to the MHU Bootcamp before you buy a park. Haha! Seriously, you can't get enough education in this space.
2. It's not easy, but it will come if you're diligent - converting POH to TOH, infill, collections - it all takes longer than you think it should.
3. New homes are much easier than trying to BRRRRR (extra "R" for relocate) old homes. If you follow Frank's advice, you're only in it for the lot rent anyway so don't get greedy on the homes sales side. Anything to quickly get greater scale and spread of risk here is better. If you do refinance a used home, you likely won't get all of your money back out so it is capital intensive.
3a. Renovating MHs is a gamble. We've renovated several of our newer (90's or better) homes with varying success. Some can be sales-ready for a few hundred dollars and we had one that didn't look too bad which ended up costing nearly $20k. Rim joists are hidden and expensive. (I have many more renovation lessons, but that's not necessarily park-related).
3b. You can't be in the park business without being in the home business at some point.
4. Dumpsters are terrible. I should have canceled this before we did anything else in the park. The trucks tear up the roads, residents think that trash beside the dumpster is as good as inside if it even makes it that far. We recently switched to poly carts charged back to the residents, and I've never been thanked so much for increasing my NOI.
5. Location is everything - It's an old axiom for a reason. Even though we're 30 mins outside of the main city, we're still within a 1/2 mile of a Super Walmart and the adjoining satellite stores that follow. This alone has been a major selling point for residents.
6. Giving residents a path to purchase helps sales, not necessarily turn over. Whether it's rent credit or lease options, people seem to really love the idea of owning their own home and it will draw people to your property. They still may not always stay or have an "owner mentality."
7. There are no perfect resident applications - the majority of people are good, decent, hard-working individuals who want to do the right thing - they just need help managing money. But still, do not skimp on background checks, employment verifications, rental history, etc.
8. Don't ever handle money in the park, especially with a park manager doing collections. We had rules in place for no cash, always give receipts, etc. Despite that, some residents got lazy, the manager let them slip and pay with cash and then receipt books disappeared. Thankfully we caught that early but the damage was done. Online payments, PayLease (or similar) or even direct bank deposits (into a dedicated deposit-only account) are all preferable.
9. A good maintenance contractor is worth their weight in gold - pay them well unless you enjoy unclogging backed up sewer lines at 2 am.
10. There is strength in numbers - find and network with other park owners. They will give you advice and pull you out of hot water when you need it most.
11. Don't let your lender hold titles to the homes with the park loan. These were rolled into our original loan due to it being the existing setup with the previous owner. We were up front of our intent to sell the homes off and setting release prices, but the bank has been slow to respond to releasing titles. It's a big kink in the sales process. Regardless, a good relationship with your lender is a plus.
I'd +1 Franks comments on pride of ownership as well. I'll long remember the day that I first saw this in action. We had just purchased the park along with all of its previous owner's neglect. I showed up with a rake, a shovel and a chainsaw to just do some simple clean up around the common areas and some of the POHs. After an hour or two, people started coming out of their homes and sweeping their porches and putting trash away and picking up their yards. The niece of the original owner/developer of the park came over to me nearly in tears, thanking me for showing a little love to the place. It's still not perfect, but we try our hardest to set the example for everyone else and they do follow.
And yes, everyone around me thinks I'm nuts!
@Daniel Smithson is my hero.
@Daniel Smithson Thank you so much! That was a very thorough response and answered some questions I didn’t even get the chance to ask. I appreciate it a lot!
This information is gold! Ill definitely be joining MHU!!! People already think i'm nuts so its cool....lol I just understand the need for affordable housing and community.