All Forum Posts by: George N.

Would love to hear you guys talk with Frank Rolfe and/or Dave Reynolds of MobileHomeUniversity/MobileHomeParkstore. They're amazing and represent an under-covered asset class. Jefferson Lily is also active here and very involved in the field with Dave/Frank.

Also, perhaps take a look at doing more podcasts with related field experts. Appraisers, insurance agents, mortgage brokers, property managers etc.

Cooper, yes, but my personal opinion is that formula is a good base-line but very simple. It needs to be adjusted. For instance, in this case you would want a higher cap for a smaller park probably. Unless it's way under rent and in an awesome market, then it may be a deal for even more. Seems like you're familiar with Frank and Dave etc. so you're on the right track. There are always master lease options, partnerships, seller financing etc. I'm hardly an expert in any of those fields.

Rough calculation somewhere between 350-400K. Of course there are major fundamentals to determine first. Is it a good market? Is there upside in rent? Condition of infrustructure etc. All kinds of stuff need to pass due diligence before really determining a price. For instance if lot rents are half the market norm in a good area you might offer full price quick. If the market is in a languishing area with high vacancies you'd pass at any price.

First thing, don't count the rental income from the homes. Generally appraisers won't and you're usually safer assuming rental income is a break-even proposition. Lot rent is what you use to evaluate. On a smaller park like this you'd probably want a bit higher than a 10 cap of course this varies by location. Expense ratios generally fall between 30-40%. So 27 occupied lots at 175 is about 57K a year. Expensed at 40% and capped at 10 you're looking at about 350K. Plus you can add in a whole-sale type price for the park owned homes.

One issue would be your loan size here would likely limit you to small local banks.

Terms there would likely be 70-80% LTV. 20-25 years, 5-7 fixed. Critera will be the same as most any other commercial loan. The property will be the focus but your reserves, experience, etc. will all factor in.

50-60% of revenue is about right on a building with utilities the major variable. On a MHP 30-40%. 

Jefferson, six figures to get someone to execute specific performance? Seems a bit high. An acquaintance of mine mentioned you're going to be at the MHU BC in San Antonio, is that the case? I'm headed there for the first time myself though I'm sure you'd be a alumni multiple times over.

Justin, I don't know what to say, parks are hot right now and there is big money chasing them. Almost every other investment sector is over-priced these days so smart folks are on the hunt. Like anything else you have to imagine that at some point it will bubble. Bottom line is in a market economy if a big dog is willing to pay more then that's a fact of life. Bonding might work but I don't know, when someone has a real cash offer staring them at the face it can only go so far IMO. And if these larger buyers (who for the most part aren't fools) are willing to pay more perhaps you're lowballing. What cap rate are you aiming for?

But the big investors are looking for certain types of parks in certain areas. Perhaps buying one with a slightly black eye would help. For instance, I just purchased one with an apartment component which would likely scare off a lot of the bigger fish. Perhaps an educated gamble on well water under the right conditions (probably the lesser of the private utility evils) or targeting a state they aren't overly active in. I figure as these places get bought up the money will start looking further and eventually start pushing those cap rates down as well.

Lots of stuff to consider. First off, septic is a big liability. A failed system could cost in the six figures to replace. How far is municipal sewer? How much would it cost to tie in if the system failed?

That's a lot of space but building out lots can be pricey and filling them is as well, not to mention time/labor intensive. What is the MH demand like in the market? Having that much extra land makes it tough to calculate. Personally I'd use the income approach and give little to no value to the extra land unless I was certain I could subdivide and there would be interest. Even then it should be gravy.

On income it doesn't look too bad on the surface. If it's fully occupied it looks like 66K gross. Those are relatively high lot rents though so probably not much upside. Generally parks run between 30-40% expense ratios with a lot depending on how utilities work. Do the tenants pay their own water? That's usually a biggie. 10K quoted by the seller is unrealistic in any scenario.

So if you figure +/- 40K net then at a 10 cap you'd be looking at around 400K. That's what most professional park buyers want. But for a small park they'd want a discount. For a park on septic they would likely pass or at least ask for a pretty big additional discount.

Tons of other things to consder but those are some big upfront ones.

Trailer "park" is a strong word for 6 trailers. It sounds like the park comes with all the homes? Ideally your tenants own the homes and you rent the land. There isn't nearly enough info provided to make a guess but for a small park you'd want at least buy at least at a 10 CAP though probably 12+ to be honest. That would, of course, be based on the income (what's the lot rent) and expenses (what's going on with utilities, are there city services etc.) And that's barely scratching the surface of what you need to know to come up with a CAP and know if the deal is even worth pursuing.

Google Frank Rolfe and Dave Reynolds. Their info is priceless.

I think @J. Martin is on point here.

If you feel you need an agent for comps etc. just get one. The sellers agent would be a moron to not accept a deal/split in that case. If you feel you can handle it alone, you don't need to negotiate the reduced commission up front. Just lower your offer by about 2% extra and let the agent work it out with the seller. The way I see it they're still going to want to cut the deal with you as they're getting more than they would if you had an agent. A motivated sellers agent can help your deal a long. And ultimately if the deal is going to fail on the back of 2% or so they agent will likely work it out with the seller.

Hi Shane, I'm active duty myself up here. Let me know if you have any specific questions.

First off, you're obnoxious and tactless so you've probably killed most chances for success right there. At the risk of feeding a troll...

I have sometimes felt that BP is heavy on wholesaling/yellow letters etc. The frequent talk of 2% etc, made me trigger shy when I was starting out as well. However, by its nature this site will attract mostly active/high volume real estate investors, not someone who buys 3-4 properties and leaves them alone for 25 years. So that's natural.

It's also important to keep in mind that it isn't 2009/2010 anymore. The market has rebounded so at this point in the RE cycle the numbers aren't that attractive overall.

That said, the 1% and 2% rules are basically rough estimates of cap rate. a 2% property is going to mean a +/- 10 cap and a 1% probably about a 7. 10 caps are going to be tough to come by, even during bad times. But there entire asset classes where a 10 cap is the norm. I'm about to close on a mobile home park in the 10 cap range and I think I can value add on top of that. Most buyers and sellers use that 9-10 cap as a benchmark for MHPs. Would I live in one? No. And there's the other point.

Your single-minded ignorant obsession with the need to want to live somewhere yourself to buy there is another problem you're having. I would only buy somewhere that I was willing to do business in and be comfortable working with. But I don't have to want to live there myself.

So yes, people are buying 2% properties and houses. There are little houses in Indianapolis, Toledo, and other rust belt cities that you can probably get 2% for, even retail. And they won't be war-zones. But they will be older, need more maintenance, and appreciate much more slowly. So, wow, you're discovering there's a trade-off in a free-market economy. Higher returns require more risk/work. Lower returns are more passive and risky. I haven't seen anyone here claiming they're picking up high-rise NYC condos at 2%. But, unfortunately for you, you're making a fool of yourself as you come to this realization. You have an entitled attitude, you're obviously unwilling to listen/learn, and you let frustration turn you into a jerk. These are all the qualities of a failure/loser. I'd take a step back and re-evaluate myself if I were you. This is an incredible amount of information on this site related to every aspect and niche of REI. And amazingly, it's free. To say that you haven't/can't learn anything here speaks to your absolute separation from reality.