All Forum Posts by: Frank Rolfe

There really is not a "matchmaker" out there that is any good, but there's no question that the more you contact brokers the more listings you will see. Jimmy Johnson is the best deal assignment guy right now, so you would definitely want to talk to him as he always has deals. If you build a solid machine to hit the brokers on a constant basis (by phone and email) then that will pay dividends. Also, if you want to hire somebody to do the cold calling for you, that can work as long as they hand it off to you if the owner wants to sell (unless they're really good). 

That being said, there are a ton of people that pretend to act as a "matchmaker" (mostly brokers) but these people tend to simply insulate you from the better deals and waste a lot of opportunity.

It has been our experience that 50% of all good deals come from brokers, and the other 50% comes from an assortment of sources: 1) direct mail 2) cold calls 3) mobilehomeparkstore and loopnet 4) deal assingments. When you talk about "finder's fees" I don't know if you're talking deal assignment fees (which we do pay and are normally 5% to 10% of face value of deal) but if you're talking about a "buyer's broker" I would not touch that as it will end your access to "pocket listings" which are the best of the broker's listings (and not publicly available). 

I would recommend the following two books:

1) "The Man That Bought The Waldorf" which is the biography of Conrad Hilton. Best real estate book ever written.

2) "Am I Being Too Subtle" by Sam Zell (who owns the largest mobile home park portfolio int he U.S. called ELS)

I would also recommend reading all the free material on MHU and listening to the Mobile Home Mastery podcasts.

That should keep you busy during the self-quarantine period of Covid-19 (and even beyond).

How big is the loan size? You might want to get a second opinion from a loan broker before you cut that bank loose. The rate does not look that bad if the deal is under $1 million. The amortization change is a big hit on cash flow, but only the principal reduction is impacted and you get 100% of that back in the end.

My only concern is that the COVID-19 impact on lending is not yet known, and a bird in the hand is worth two in the bush.

"Quarry" is not really a positive sales attribute, is it? Definitely put "Estates" on the end but I would want something that is more positive for the start. If someone called you and said "what are the top three reasons that I should move to your mobile home park?" would you say "#1 is that it's near a quarry"?

Take your #1 selling point and put that in the name followed by the word "Estates". What is the key trait that would make a customer want to live in this property? If it's giant oak trees then "Big Oak Estates" and if it's the Blanchard school district then "Blanchard Estates".

Then, every time you say the name it's a sales pitch for the property.

The word "Estates" on the end makes it seem classy and like a residential subdivision. The word has very good vibes with the average American.

The only way this would work is if the lot rents are high -- like $400 per month. Those abandoned spaces are going to need to be probably totally repaired to make them safe to use, and you're right that 11 lots is not going to give you much scale. The fact that the park is abandoned is also a cause for concern. If you could buy this land for next to nothing, you'll still have probably $40,000 of cost in bringing the lots back to life (figure at least $1,000 each) plus building a nice entry fence and signage, removing dead trees and limbs, and road repair. You'll also have to make sure the city will accept your plan, as the park may have already lost its grandfathered status.

Then will come the problem of bringing in mobile homes to fill those lots. You'll have to run a test ad and see what the demand even is in this location and at what price point. A new home mortgage will add around $400 per month to your lot rent amount, so you may be stuck bringing in used homes. That's capital intensive and will cost you at least $20,000 per home when you take into account the house, the move, the set, and the renovations.

Then comes the biggest problem. No lender that I know will finance such a concept (unless you can find a really aggressive local banker). So you'd have to do it with all cash. And that gives you a really bad return on investment.

Warren  Buffett once said that business is not like the Olympics -- you don't get any extra points for taking a more difficult event. So why would you want to put yourself through this much risk and trouble for a 11 space park?

You'd be way better off buying an existing park with normal leverage from a bank, and just increasing the lot rents.

But then again, I've not seen this location. If this is a piece of land across from Walmart and next to a McMansion subdivision then it might be worth the shot. But since it's an abandoned trailer park in Georgia, I"m betting that's not the case.

There is typically no problem with having the tenant-owned homes at a lower rent level than the POHs with the expectation that, over time, they will all be at one level.

It's a good idea to put all park-owned homes in a separate LLC. They are a hotbed of liability and the lenders and appraisers don't want their numbers stuck into the real property performance numbers. Even the REITs hold them separate.

In most parks the manager makes a daily deposit to a nearby bank branch in the park's name. Having the manager mail the checks is risky because they might be lost in the mail and it would be a disaster. Another option is to have tenants mail their checks in to a P.O. box -- at least if one get lost it's not the end of the earth. Electronic payments are great except you have to have a bank account to do it and many residents do not in some states. Having the resident bring a check or money order to the manager is the system in probably 95% of all parks. In some states, you are required to allow that form of payment.

6 occupied lots x $325 x .5 (because it's so small) x 12 = EBITDA of $11,700.

At a 10% cap rate the value of the real estate is $117,000.

Then youi can add in the valuie of the homes as personal property. If they are from the 1980s or older figure on maybe $2,000 per home and if the 1990s and newer maybe $10,000 per home.

Add the real property and personal property together and that's the approximate value, subject to due diligence.