All Forum Posts by: Jon Dorsey

Do your market research and see what makes since price wise. 

What’s the deal with Lonnie dealer? How many of the homes? Be ready to buy them at auction or prepared to lose them (empty lots)

- this may actually be the owner as well just held in a separate entity

I’d avoid the management company at this point bc they might be the problem, especially if he’s using them at the other parks too.

Budget capital expenditures into your startup funds, probably hasn’t kept up on any maintenance.

Maybe approach the bank and see if you can settle it for less with them. 

To piggyback on Chris with Agency Debt they usually want to see management experience so not best for 1st timers but would be there for refinancing a few years down the road.

You'll see 72 or 70 being used as a quick guide of what a park would be worth when on public utilities; 60 is used with private. Once again, rough estimation to get you going and then dig more into financials.

72 = 12 months x 60% expense ratio / 0.1 (ie 10 CAP)

or roughly 70 for quicker math

200*12*72 would put the value of the MHP at $172k

Add in approximate value of the house, or rental potential ($400/mo * 12 * 50% for expenses / .1 for CAP rate = $24,000

Add value for any homes, if any. Sounds like $0 since they are TOHs (tenant owned homes).

Subtract out any major fixes (demo of store, fixing broken infrastructure, reserves for failing septic, etc.)

Total = $196k - any big issues...

It would be a good intro to it and being right down the road from you is the only way to make it work for a smaller project.

Risk vs reward is what you have to determine. Being in the country, is there demand to keep it filled?

Thanks for the advice. 

My takeaway is to make an offer without reducing potential costs, during diligence get a solid estimate, and then renegotiate deal. 

@Brian Ellis I do see this as an opportunity but may be biting off more than I can chew. I see huge opportunity but it’ll be a bigger project. 

Any recommendations on how to find someone to partner with that has experience in these project types?

Need help from the vast knowledge in here. 

I found what looks to be a great property in terms of location and value add. I’m looking to put an offer down but there’s one concern, the foundation. 

It’s a small apartment complex in the heart of a thriving downtown area. It’s on the edge of a flood zone, naybe the 500 yr flood area. Management has left room to raise rents. Units need a little sprucing. 

The problem is the building seems to have a foundation issue. There’s “stepping” in the bricks, the balconies are showing rebar, and it just feels like it’s leaning slightly when inside. 

How should I approach this ahead of PSA?

- Get a rough estimate without spending money, if that’s possible, and reduce offer price or havevthe work done by current owners?

- Get it under contract and get a thorough inspection, then renigotiate?

- Other options?

I have not undertaken such a project but the upside is there and I want to learn what I don’t know. 

I understand that I won’t really know how it is until they start working on it. It could be as inspected or worse. 

Any knowledge, lessons learned, things to watch out for, etc would be appreciated. 

Value occupied paying lots only. 

No value to empty pads. Utility hookups may not even work so in the end they’ll probably cost you to fix or prep for hookup. 

You’ll have to judge the market for ability to fill it up or see if it’s just being mismanaged. 

Sounds like all 12 homes are POHs, is that correct?

I’ve come across a few MHCs with a good number of POHs in them. The problem comes that the seller is CAPing the POH rent which can be pretty substantial. 

Example Property:

Physical Occupancy: 60%

Economic Occupancy: 100%

TOHs: 70

POHs: 30 (mid-late 2000s models)

GI Lot Rent: $360k

GI POH Rent: $162k

Public S/W

Exp Ratio: 40%

How are you approaching these properties in today’s environment when it comes to valuation? 

If you don’t include POH rent in valuation, how do you present/discuss this with the seller?