Ok, so there is a 17 pad park for sale. Been for sale for 400+ days. Currently 14 pads owner occupied and an additional going thru courts to be obtained by owner for abandonment. This has been owned by the same people forever, and the same people have lived there forever. Their rents are just $165 per month. In this area it should be more like $250 at least. Everyone is on a month to month lease. That being said, the reason it has not sold is it's a dump. Not the land, but everything on the land. Each trailer is circa 1873 and there is so much trash, old cars, debris etc scattered everywhere its crazy.
At current asking it is a slightly positive cash flow situation....
I would have to go in, immediately be the bad guy and say look, clean all this up, here are the new rules, and your rent is going up too.
I would assume many would leave, then I have these trailers. Not sure if they can be rehabbed, although my father in law manages two huge properties and says I would be surprised what they can do with these things.... but if not, I have to dispose of them.
If it were run like a real park, a real business, this thing would make alot of money. Getting from dump to over the hump is the real challenge.
I just may make them a crazy offer. Talk me out of it.
I'm the kind of person that thrives on challenge. I enjoy doing things that others find too difficult and I jump in while everyone else walks away. Unfortunately, I don't know you are your abilities so I can't help much there.
Without seeing it, my guess is that it would take some work and additional money. You'd have to buy the park, kick out all the tenants, renovate the trailers or get rid of them, and then find new tenants. It would be tough to find quality tenants to pay market rates prior to finishing the work so you may be sitting empty until everything is turned around. That's where you're going to lose.
There's a very good chance the current occupants would stay. Market rent is only $85 more than what they currently pay. If they decide to move, they would have to (a) find a park that will accept their crap, (b) probably pay a higher rate than what they currently pay, and (c) pay moving costs. The moving costs will run about the same as six months of your increase and your tenants are living paycheck-to-paycheck so putting together $500 or more for a forced move is not easy for them.
If it were me, I would probably offer something low and try to get a good deal that would offset the amount of work needed. Justify your price drop by explaining how much it would cost to clean up the property, how much it's losing every month with low rent, etc. Maybe you can scoop it up for a good price. Then you can increase the lot rent and increase the standards.
- All existing homes, decks, and accessory structures must be painted an approved color
- All trailers must have metal skirting
- No broken glass, etc.
You can probably visit other parks to research what rules they use to keep the park nice. Again, this will force the current occupants to do the majority of the work for you. If they refuse, evict them and get them out.
You may also considering screening all your current occupants to clean out any drug dealers, sex offenders, etc. I don't recommend that unless there's an identified problem.
Don't make it all punishment. Find out what the owners want and try to provide them some benefits. For example, maybe you can install fencing around each lot to help define lot lines and encourage tenants to grow lawns. Plant some trees. Beautify the entrance. Put gravel down in front of the mail box so they're not stepping in a mud puddle to check the mail.
If owners do want to leave, offer to purchase their trailer for cheap, cheap, cheap. They are obviously livable right now but you would have to find a contractor that could turn them around for cheap, cheap, cheap. Then you could sell them with owner financing and make a killing. For example, buy a trailer for $3,000 and put $5,000 into it. Sell it with owner financing at $2,000 down and monthly payments of $500 (not including lot rent) for 36 months. If they make all the payments, you've sold the trailer for $20,000 and increased your investment 250%. If the deal falls through, you clean it up and sell it again. There's a guy in Texas that dropped out of college to flip and finance trailers and wrote a book with his systems in it. If I remember right, he was investing less than $10,000 into a mobile and would make at least $40,000 when he sold it. He was a millionaire within a few years.
It would be fun to figure this one out if you get a good price on it.
@Nathan G. Thanks! I am thinking along those same lines. I do enjoy a challenge but this is a new one for me. Thanks for the thoughtful reply.