@Dylan McClung Check out @Kevin Bupp Mobile Home Park Investing podcast #44. In it I explain how I work many hours and still have the ability to manage my own MHP investments. There are a lot of great comments here and I particularly agree with @Matt P. opinion on park owned homes. I would like to add one thing that you may not have considered. Most of my tenants own their own homes. As an MHP owner it is inevitable that you will one day own a mobile home. What I do, and what may work for you, is I sell on rent credit. You have to be very careful not to break any Dodd-Frank rules so speak to a qualified attorney. The way I do that is by renting the home. In the lease I state that the tenant is responsible for all maintenance and repairs. I also state that every time the tenant pays on time (this is important) I will apply a percentage of their rent to a no cash value (this is also important) credit account in their name. Once that credit reaches a healthy balance they may use it to buy any home currently for sale in the park. As you can imagine, they normally buy the one they are in. If they leave, the credit disappears. If they pay late, they get no credit that month. If they destroy something the rent credit disappears. I usually have them pay a pretty healthy safety deposit on the home too. This way you are renting the home without the burden of maintaining and repairing it. You have to use reason. You cannot expect them to make a $2,000 repair a month after they move in if ever. We always go through everything to make sure it is in tip-top shape prior to rent. This has worked very well and it is rare that these tenants pay late or call us with issues. I am currently transitioning out of my day job somewhat but I was working 70-80 hour weeks and sometimes more when I found, purchased, and managed my first park three hours from my home. It can be done if done wisely with the right tools. Education is the key to doing it wisely. Systems and processes are the tools.
Easiest place to find financing for a park is the bank that is already financing it. I've done that for nearly every park I've bought over the years.
I found a deal on a small 7 space MHP in seemingly great condition but mostly vacant and curious to get someone with experience take on the situation.
I found this park by responding to a post for a mobile home park vacancy on a local Facebook buy, sale, trade site. I messaged the person listing the vacancy and asked if they have considered selling the park. To my surprise the owner of 30 years said yes he is retiring and would like to sell but he hasn't attempted to yet. I stopped by the park and snooped around a bit. It appears to be in excellent shape. Full concrete pads for the mobile homes, also wired for the possibility of RVs, manicured corner lot in a residential neighborhood with several new construction brick homes for sale.
My concern was that this park is completely vacant with the exception of two Park owned mobile homes that he is receiving $550 per month rent. In his listing he was asking for $350 per month space rental which seems to be in line with most of the area. When asked why so many vacancies he replied that he just hasn't tried very hard to fill them and has lost interest. He said it has been a trouble-free park for the entire time he has owned it and looking at the infrastructure I do believe it to be true. I also believe that I can get it filled with no problem just by comparing the location and condition to others in the area.
The owner said he will take $150,000 for this 7 lot Park and he is not open to negotiation. He also said he is not open to owner financing. Without verifying and just going by his word he said taxes run around $2,000 a year.
So.... hopefully someone with experience can help me determine if this is the great deal that I perceive it to be and also would this be worth doing as a no-money-down deal as I can quite possibly get the down payment funded through a private lender. My concern is what the bank will require since there is so much vacancy.
Any info, suggestions, advice is appreciated.
Thank you in advance.
@David Mathews at first glance, it looks like he came up with his price using a fully occupied NOI ( $350 lot rent*7 pads* 50% expense ratio*12 months/ 10 Cap= $147,000). What he really has is a 70% vacant park and two mobile homes.
When you say you'll get it filed with no problem I disagree. You'll need to aggressively market your area to find a dealer or individual/investor to move a house to your park, which takes you time. In that case you'll most likely have to pay the transportation/set up costs to entice them, which will run you at least $20k. Or you'll have to buy homes, move them in and fix them up, which is around $60k. That last scenario then puts you in the rental business until you can sell them on rent credit for 2-4 years.
I don't think any bank will lend on a 70% vacant park no matter how good the condition and the loan amount doesn't move their needle. So you'll need all cash on this one or a Line of Credit.
If you think its a good deal with lots of potential and want to pursue it I'd have him give you bank statements for the last three years. Dig into those to get an accurate picture of the fixed costs of the park so you can model your fully occupied NOI. Then I'd use a higher cap rate (13-15) to account for the work you'll have to do getting the park on its feet.
Best case, you get the park for $100k and put $20k into it to get homes in over the course of three years and another $10k for misc expenses. You get the expense ratio down to 30% and raise the lot rent to $375. That's $22,500 NOI in year three. You have to season it for a year before the banks will talk so you wait until year 5 and get a 70% LTV on the park worth $225,000, which nets you $157,500. That's a 15% IRR.
A pretty good return, but it relies on a lot of "ifs" If you can fill the park with homes in three year. If you can get a loan. If you can sell the POH, if you don't have to buy home to infill, if you can raise the lot rent. Seller financing is a game changer in this deal though.
Edit: I wrote all of this before I saw you had started your own thread... my bad.
Thank you very much! I did start my own thread about this but nonetheless, your response is exactly what I needed and seems to be the common sentiment. It also gives me the insight that I need to evaluate future deals. I believe that I am going to hold off on the mobile home park idea for a little while and build up capital for that "special deal" when I do come across it.
My name is Armando Diaz I been doing residential,commercial NS mostly multifamily remodeling but for the last month I been going around personally and on the web absorbing information on the mobile home investment and I have come to the conclusion that it is a good way to start climbing to the top. I found some nice ones so nice and so cheap and I know I can make $10,000.00 a week but I need a full time partner to be able to perform my advantage is that any construction materials I can get am for half of the price and most of the time almost for nothing and I am a subcontractor with tools and transportation and lots of experience in remodeling. My only problem is that I am a beginner and last year I invested $150.000.00 which I turned into $600,000.00 on real estate in Mexico. After that I purchased more land and I doubled my profit on that but I will repeat I can get materials almost for free I am searching for a partner that has a goal to live in financial freedom. I have a master plan where in one year me and my partner can be receiving $20,000.00 a month each one of us and with God's permission I am sure we can do it but I need someone who is hungry and most of all smart and hardworking because it's gonna be the hardest working year but the year that will completely change life for the better...
This post has been removed.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing