All Forum Posts by: Jim Johnson

 So- the safe act has lots of parts but one is 'a security interest' in the home. Interest is one part, but a lot of this is adjoining someone borrowing with the asset. So- yes you would be in violation IF you create a security interest. 

Second point- If you take payments until the home is paid off the IRS will call this a disguised loan, and you will have to use the IRS rules to set a internal interest rate that you need to account for on your taxes. This is a BIG IRS no - no. It is legal, but it must be accounted for. 

 Letter to residents-

Dear Residents,

This is a letter to inform you we are seeking applications for the management position at the __________ Mobile Home Park. Our current manager is vacating the position so we are seeking to hire and train a new manager.

We will be hiring a park manager, to oversee and maintain the community as well as collect rents and enforce the park rules and regulations. We are currently looking for residents who might be interested in this position.

If you are interested in possibly becoming the park manager, please contact us via email – _________________ or fax us your information to _____________. We will give you the details of this position as well as the requirements and proposed compensation.

When you contact us- please let us know why you think you would be a good manager and include any experience you have in maintenance and management. Experience is not necessary.

We plan on keeping the park in good repair and improving on areas we feel are necessary as well as needed.

Thank you for your interest.

end of letter-

I do some consulting for buyers and current operators. Getting through to me via my website is perfect. 

Well... I have parks this size and I have a manger. I send a letter to the residents stating I am seeking a manager, and some of the duties they would perform. If that does not pan out- I post on craigslist. Now- I require my managers live onsite. I comp space rent, and give 10 per month for each occupied home and 15 for each vacant lot. I choose not to visit my parks except about 1 time per quarter. If your there too often- you have a job, not a passive income investment. Even small parks have quite a bit going on with collections, posting notices, violations etc... Using this strategy I can own parks anywhere close to an airport and manage the managers from Colorado. questions? 

So I understand what your looking for, but if you want real life stuff I am not sure you will find it in the classroom or in a book. There is clearly good data in the bootcamp offered by Frank Rolfe, (Dave Reynolds no longer teaches at the bootcamps) but Frank is not a typical operator or owner. They sell a home study course- that has DVDs which might give you enough to feel comfortable with. There is also a due diligence manual that really lays out a good process for having a park under contract. Things that need to be done, layouts for dates etc. I think if you read through the different forums you will quickly see the challenges owners face, and how they solve them. You will also see how people view differing things in the park industry. 

You might try just talking to park owners and asking them to share what they like, what they do not like etc about the business. Most owners I have met are very down to earth and would gladly take some time to talk shop. You should probably learn how to walk a park, what to look for etc. For that you might ask if you can tag along for a park owners visit to one of their communities. You might be buying the tickets, hotels etc- but you will learn more in a good day with a good owner- than you will with any books or classes. 

If your really wanting to dig into the listing side- you might look into CCIM classes. You might already have this training, if not even the intro class is valuable. In a previous life I had a real estate licence... but that is another story all together...

There are also several very good linked in groups. I am also pretty sure there is a big group that meets every year in Chicago. I have been invited in the past, and might even attend if I have the time open. If you find me on linked in- I think you can see the groups in my profile. Anyway- If I think of more I will add to the post...

I do not go as far a Georgia, so that is not my market. Amazing deals will have a 50 - 100%+ cash on cash return between the 6th and 18th month. So I look for something that takes about 6 months to get really cash flowing. For example- I bought a park and put about 120,000 down. That park had a water / sewer / trash metering and allocation to put in place, and a space rent increase. So the W/S/T increased the gross by about 65,000 and the space rent increase added about another 40,000. It was all in place in the 5th month. So if I started counting at the 6th month- and went to the 18th month, when you factor in the cash flow I had without the increases I was cash flowing over 100% in that 12 months starting at the 6th. The park is also worth about 900,000 more than I paid for it. So it looks good no matter how you slice it. That- is the kind of returns I thing are off the chart good. They also are the only types of deals I do. Some people set goals on how many deals they will do- my goal is to only do smokin good deals. I do not care if it is 1 or 10, or maybe none- only the really, really good ones.

So when I use google earth, and also street view... I am counting lots, using the measure tool to check the size of the homes and the lots, get a basic idea of lots per acre, paved or gravel roads, the type of trash service, years of homes, looking for septic fields- (you can choose what overhead date you use on google earth, and in the winter months sometimes the leech fields will be green strips), looking for utilities- overhead power etc. On street view I can see the park from the street- and many times they drive the cars through the parks. Some parks you can spot a private treatment plant, or a water storage building. I look at distances between the park and other things, like schools, fire departments, stores etc... I look for RR tracks as well. Scrolling through the differing dates I can see if homes move in and out of the park, I can look for other parks close by. I might start calling the other parks and begin some market research. So I am looking at small tings in the park, and larger things in the community. 

As for reading material- what are you trying to learn? Ownership and operations or how to value them? 

Kyle,

Great questions. There are two real sets of buyers, individuals and institutions. Most individuals operate under the 100 pad number, and almost all institutions operate over it. So it is in the open, I used to teach / present at all MHPS Bootcamps when they started out. So I understand the material- we very well. I have also partnered with Dave on a couple of parks. 

The great deals on The Mobile Home Park Store never see the public eye. If they are really good, they are weeded out and held internally for Dave and Frank to buy with their fund. The second stop for listings is there is an advanced list you can buy into- so prior to the deal hitting the website a select group that purchases advanced assess goes over the listings. So the deals that really hit the website have been picked over twice, and your probably 3-5 days late in seeing the listing. So not much sneaks through  that filter. Loppnet can have some good listing- but it is a footrace. I called on a deal once, and so did Dave Reynolds. He called about 15 minutes after it hit, and I called just after him- and neither of use even got a chance because we were well down the list of people that called in. If your playing the footrace game, you better be willing to put a deal under contract on the first call- period. 

So you need to develop a list of brokers and there are options for this. So I for instance have names and addresses for park owners in some states. I might print out that list for a broker, like mailing labels and let them contact them. With the understanding I am looking for a look at the leads. Or, I might contact the owners myself, and the deal I know are looking to list- I will feed to a broker, again with the understanding they will feed me leads the other direction. The best way I have found is to develop an email list, and contact brokers once every 3-6 months. I only do this when I am looking because there are just too many deals to look at. I will mail out to 500 brokers and probably see 5 parks I had no idea were on the market. It might take 2500 emails to find a killer deal, but there are good deals in every batch. So, yes you need to contact agents. The big house agents do big house deals- and every now and then do a smaller deals. 

On the broker side, frankly not enough do mobile home parks only to have a good list. So I jog the memory of them if I am looking. There are 'deal hunters' out there also that just find deals and flip contracts or leads for a 'spiff' I call it. 10 - 50 thousand depending on the deal. Yes- I once paid 50k for a great contract. 

On the buyers side here is the deal- really good deals are dug up. Contact park owners, contact agents. When I contact agents it goes like this- I get a call- 

'well see- I know old man Fred, ya know on the north side, that crafty devil. Well he has that park, probably 50 homes in it and well, his wife is not feelin so well and they are spending more time at the winter house in Florida and in the RV. I heard tell at church last month he was gonna sell... maybe I will stop by the Diner at breakfast next week and see if he is interested. What kind of info are you looking for?'

And I have now generated a pocket listing. I get the location of the park, and with google earth I know more about it in 60 seconds than most people will in a full walk through. In the next 2 minutes I have a good idea of what my top offer would be, I just need to understand some income and expenses more. That is were the meat is on the bone- make your own wind. This is the same advise for brokers and buyers. 

More than 1/2 of my mobile home parks have been funded with other peoples money. Now I deviate from the get go on these deals and I open a large equity side for the private investors. The deals I typically find have very large upside, so I have never had an issue finding investors. There are lots of people with cash sitting on the side, looking for something other than a saving account to put funds into. I have some investors that want to fund home purchases for my parks, and we set up a separate company for them to do so. I will say I have some water under my bridge and that probably helps get these deals funded. Part of the package is a page that outlines who the principal operators are, and my page has lots of diverse real estate experience and a pretty good track record. So I can sell the deal, and my ability's as a managing member of the deal is seldom questioned. So I do this more in a partnership than straight funding, though I have several people in my database that do not want the possible downside a partner is subject to, and just want to fund and get interest. Here is the deal- if the property your looking to buy is really, really good- people will line up to fund it. 

Well Well Well... 

So in general, to figure out a parks value you need to know space rent and the number of lots. There is other data you can use to try to back door where space rents should be. If you look at a 2 bedroom, 2 bathroom apartment rental average, space rent amounts to about 1/2 of that number. So if rents are $500 / month, figure a good ball park for space rent is $250. Or at least the market should bear that. Most mid west towns, the smaller ones, will be in the 150 - 350 range. There is a very complete list of this data, but it is privately held and to my knowledge, not shared. If you were to data mine one park in each metro area, you will have a baseline. Some states have lists of mobile home parks, the lot numbers and the owners info. I know- I am on several of these lists. So you will have to adjust the number of lost you go after in each general area if you really want to stay over the $750,000 purchase price. If it was me- I would go after every park over about 30 spaces. You do not need to visit the parks to list them. Another option for the smaller parks is to develop a pocket listing list of buyers, and just market the data through that list. Well priced smaller parks go under contract in hours, not weeks or months. They close in 30 - 60 days with seasoned investors. 

Park owned homes give a false reading on your CAP rate. This is why they are very, very hard to price and banks go crazy when the contracts come in. So here is how you value them, separate out the lot rent- CAP it and you have the parks value. Now value each home at the 'blow away' value. If the home were to be blown off the park, what would the insurance company pay on it. You might deduct the moving costs if your really accurate. Your now selling 2 businesses- a mobile home park, and a flat apartment building, that does not hold its value. So 5 years from now the homes are worth less than today. Sellers and buyers should understand this, many choose to ignore it though. Like cars- the values lower until you hit a basic bedroom / bathrooms have value number. Also- there is more value for a 3 bed home than a 2 bed home- even if they cost the same. So add more tot he 3 bed, or take some away from the 2 bed. These parks have much more in the expense column, and they are much harder to sell because they are not as passive as a space rent only park. So even the CAP number is higher. How much- 1-2 points- more if the homes are very old, or lots are vacant. I bought a full park in Indiana- 76 pads, all park owned for about 350K. Once the park is fully converted and rented out as a space rent only park- I will market it for about 1.3mm. If you understand what happens with cash flow these deals will give you chills. So the deals work IF they are priced right. Learn how to value these and you will know which ones to list.

Most owners of parks do not know how to value a park. Because of this- someone says it is probably worth 2 million and they instantly have most of that money spent. Unwrapping bad information is a long task, but if you can walk an owner through the pricing process you can teach the owner what the value really is. This is the process I use to put deals under contract. I never toss out a number. I get a pad of paper and a calculator, and I ask they do the same. We both write down the same numbers and we both do the math. In the end- the numbers do not lie. If the owner still wants more- well for me it is time to walk. Let someone else list those deals. Maybe they will call you back when it does not sell. time suckers are parks that are overpriced. Price them right and they will sell right away. I listed a park a while back and had 20 calls the first 24 hours. You do not need to leave much chicken on the bone to make a park look really good. 

There are very few good brokers for mobile home parks. Remember your selling cash flow, not the Willis Tower. My park with all old single wide homes makes the same money per lot as the fancy double wide park up the street. In fact- it makes more. Because people get caught up in how it looks, many will not touch the older parks. Well- the CAP rates are then higher, and the cash on cash goes way up. No one steals homes from an older single wide park, everyone wants the big new ones. So the older parks can be much more stable and your inventory tends to stay.

ok- I am tired. 

I missed part of the question- I look in all the states west of a line drawn from about Michigan down to the tip of the Florida panhandle. In general- no more than a 3 hour flight from Denver. I really like the mid west states.