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!
