All Forum Posts by: Jim Johnson

Our homes that come back if financing fails, cost on the low end a couple hundred, and on the high end a three'ish thousand. The big items are roof leaks, flooring, bathroom repairs. The average, probably $2,000.
I want to be clear- I do not work on the homes myself. We hire out all of our work- so I am a zero sweat equity guy...

1. Is there a size range that tends to have the most upside potential from the perspective of cashflow and resale value?

A- parks that are too small for out of state buyers to operate will trade at a higher CAP rate- but if your just looking at the upside- if you buy with the higher CAP, and sell with the higher CAP- your upside is pretty constant. Once you are over 100 pads, your really flooded with the larger players nationwide.

It seems the REALLY small parks, under 20 spaces, are difficult to finance (aside from owner financing) and it takes a lot of them to make the cash...if one were 3 miles away, I might do it, but across the country doesn't seem as worth it.

A- good observation. Small parks are very hard to finance- except for smaller, local banks.

Over 200 spaces or so seems to have lower cap rates, probably due to the fact that once you hit that size, you start getting into the Institutional Investor crow. However, a low-occupancy park of this size could be a great turnaround project to resell to an institutional investor...

A- I think that number is 100 pads- though the real driving number for CAP rates is economy and prevailing interest rates. It is very true, larger parks will tend to have smaller CAPs, but some areas will have high CAPs no matter what size the park, and some will have very low CAPs.

My gut says 50 - 100 spaces is the "sweet spot" but am I wrong?

A- I find that number should be 35 - 100. You can pull off a out of state ownership operation with 35 pads and do well, and over 100 and your competing with bigger players.

2. What are the pros/cons of "Over 55" parks? Do they tend to have higher or lower cap rates? Are they more or less management-intensive? I'd assume you have to keep your grounds better and have more on-site amenities, but, at the same time, since seniors are less likely to let auto parts build up outside, or throw parties, they may actually require less direct management...

A- So the problem is keeping them filled. You are in a federal protected development now, and to change out you would need a huge number of the residents to ok the change- which you will probably not get. Now in some areas of Texas, Florida, California, Arizona... etc... there is still a pretty strong demand for over 55 housing. Personally, I am not in a strong 55+ state, and the closest I come is my parks in southern Texas. The problem there is- many of the 55+ parks are second homes, winter homes, summer homes... and after 9-11 the numbers have been dropping in that segment of the market.

anyway- that is my take...

We compensate our managers all in about the same way-
Space rent comped- just because people knock and they deal with issues.
$10 / month for each occupied home
$15 / month for each vacant home
In some markets we will also bonus for homes sold

Ryan R-
I own several parks, the closest to you in Indiana. I would tell you from my experience you probably need less information than you might think to make your offer. Really, if they give you the net operating income, how many lots are occupied, and who pays water, sewer and trash you probably have enough to put something together. Most of the data your looking for will come in the due diligence period, and after you get that data and have done your site inspection, you can go back to the seller and make modifications if necessary. Note in your due diligence you will want to research the area, call all of the parks in the area and learn what they charge for rents, and who pays utilities. You will have to make some adjustments along the way for differing utility arrangement's. If you do not really know what your looking at on site, or with the books, hire a consultant or take on a operating partner that will fill in the gaps. I have been a guest presenter at one of the educational bootcamps for about 5 years now, and if you learn well in that environment they can be well worth the investment. If your not the classroom type, hire or partner.
A few tips... once you get the gross income, the expenses should be about 40, 45 or maybe 50% of the gross. If the expenses are presenting way less, like 20%- someone is probably hiding expenses in the capital improvement part of the book. Very, very common. Know how to read the books. If the expenses are over that 50% mark, you are probably looking at a park that is managed really poorly, or someone that is writing off stuff in the park they should not be. I looked at a park a few years back, where the owner was writing off huge chunks of his personal helicopter.
last thing- owner financing can be great- or the kiss of death. Watch the terms, do not get sucked into the price. Interest rates, length of the terms and all that stuff plays a huge role. You can have great cash flow, but so overpay for the park you will never refi it. Again, if your not a rockstar at terms and owner financing, find someone that is and get them on your team.
good luck!

I like it because it is a one time buy, and all upgrades etc are included. They also just started hosting, though we self host our account. They also offer ACH, you can build out maps etc... Anyway- I am a bang for the buck guy and this really gives it. I have met the owners / programmers and they are great people. I have sent over several ideas for tweaks to the software and many times- I get a update notice and poof- there they are!
Good luck to ya...

We submeter in all of our communities. The keys are- make sure your meter are reading in the same way as your being billed. Some are gallons, cubic feet etc... then we use a program called Park Skdekick to track all of our mobile home park activity. It does a great job tracking utility usage. Note every state has differing billing requirements like, the bill might need to be postmarked 15 days prior to it being due, or the bill must show the beginning reading, last reading and usage. Some states have disclosures for submetering, and some allow you to surcharge the bill. So do your homework on your state and understand the laws.

Robert,
I want to make sure I am following you here... Your going to sell or rent the homes? This looks like renting... so I will continue down that path... your paying 15,500, and renting for 6-7 hundred and then- who pays the pad rent?
Doing some quick numbers, a general rule of thumb I use is to keep the blended payment of pad rent, and home payment / rent lower than the average rental of a 2-3 bedroom apartment. In my parks with pad rents of 200 / month, the payments might be 300 or 350. Blended payment- 500 - 550. So off the cuff, if there was some correlation between pad rents in the areas, your overall payments seem high to me.
Also- a strong word of caution. Your subleasing a property. So controlling the tenant can be a real pain. The park knows your paying the rent, so they are not motivated to approve a tenant. You need to factor in vacancy and repairs, which on a mobile home can be pretty huge. Most homes we rehab after we repo them cost 2,000 if the tenants were really nice to them, and up in the 3 - 5 range if they really rode it hard.
I own 6 parks, and carry financing on over 100 mobile homes- and I do NOT rent any of them. Period. Mobile homes are not built like your stick built dwelling, so repairs are more frequent, materials are sub standard etc...
Why renters run celery and entire pots of spaghetti into the disposal, and wonder why it is frozen solid... I will never know.
Anyway- if your really selling... I will post up another reply...

Daren,
I sent you a PM with my contact info. Email is best to set up calls... that way I know I am ready and have free time... feel free to ask questions here as well... I am happy to share what I do, no secretes in what I do- pretty basic stuff.

I am looking for 10+ mobile homes to fill a park I have in Indiana. My park is in Lafayette, but I have pulled homes from as far as Michigan, Illinois, Ohio and other parts of Indiana. Shorter lots in this park, so nothing over 66'. I can pull any age home into the park, and I have a mover lined up that I have been working with. Turn key homes please, no major fix up projects...
Thanks

I am needing 5 mobile homes for a park I have in Central Nebraska. You find them, I will move them. The park is in the Hastings general area, but I will pull homes in from a 300 mile radius. The homes can be pre HUD if they are titled in Nebraska, otherwise post HUD. So 77 or newer... I have big lots int his park, so can fit homes as long as 80'. Premium for 3 bed / 2 bath homes, but I will take 2 bed as well. No one bed homes...
Thanks...