I am new to BP blog but have been an investor for 2 years now. I have been focusing on buy and hold, mainly do multifamily and residential and so far its been going well but as I was looking for another multifamily, a family friend of ours (my fiance and I) mentioned he would be interested in selling his mobile home park with currently 8 mobile homes and yet room for 11 more. Now he is looking for about 350k and just from research ive been doing from comparables it seems like a decent price but it will need MAJOR renovations starting from paving the entire park, landscaping,tree removal, and some of the homes are in very poor condition that we will need to basically just get rid of. Not counting remodeling that we will need to do to make the rest of the place look decent and attract the right tenants. Our goal in the long run is to slowly offer a rent to own and at one point just worry about collecting the space rent. Besides obtianing lease agreements, financial statements, Rental history, etc. Is there any advise of what additional info i should request from the seller? Also, for this loan I would most likely need a commercial loan is there any type of financing I am able to get for the renovations such as a line of credit from a bank?
@Gisela Pallares two other key components too research are the utility bills and the zoning. Get actual copies of the utilities (water and sewer). Electric should be limited to community lights etc. On zoning you need to know that the park is zoned correctly and what are the local ordinances you have to adhere to for adding homes to your park. These can be very cumbersome. Also make sure to inspect thoroughly any park owned homes as the repairs add up fast.
Commercial loans should allow for renovations if it adds value (like adding more homes to the property or facilitating the ability to increase rents). However given the price and depending on the rents you may have a tough time since it would appear that the property does not cash flow very well going in.
I owned a mobile home park some 20 years ago. The biggest problem I had was evictions. You have to evict the entire mobile home and you need a space in which to park the home when you remove it from its space. Also you have to find a business that moves mobile homes. And you have to think about insurance to cover the home when it is parked. You can't just remove the home and put it out in the street. Expenses you have to be prepared for. AT that time I started to purchase mobile homes from dealers and installed them in my park. I rehabbed them and sold them owner financed. It was a good way to go because I was there managing the park and keeping an eye on the home I sold. I did 10 homes in one year and had $350 a month including lot rent from each home, thats $3,500 per month and $42,000 each year over the next 5 years. I sold the park 3 years later to a mobile home dealer for twice what I paid for the park.
@Gisela Pallares the price sounds high for what you are buying. A very quick formula to determine rough value is: Occupied Lots X Lot Rent X 60 = Price. Use this if the park pays for the utilities. If the tenant pays for them us 70 instead of 60.
You also need to be very careful if the park has well water and septic for sewer service. Paving the road can get expensive. Consider getting a bid from an asphalt company during your due diligence phase and decide if this amount should come off the purchase price.
Mobile Home University sells a book called The Mobile Home Park Due Diligence Manual. It would be a good guide for you if you go down this path. Their bootcamp is also a very good source for education. You should attend before you buy a park. I think they have a class coming up in Seattle. Good luck.
@ Jared Rogers for the zoning, can I find this information by calling the city?
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