All Forum Posts by: Roger D Jones

Market conditions need to be just right and you need the proper maintanance structure in place. Spend more on overall maintenance but bottom line NOI 30% better than if all TOH. This one park allowed me to retire early.

I can also confirm that this park was last purchased for u see 200k 6 years ago.

Just to let you know who your dealing with the seller bought the park... sucked all the life out of those 9 trailers with no maintenance, care or caution leaving them as hulks for you to risk rehabing.  And he wants 475k for his endeavors.  Offer him 150k and he can keep the profit he sucked out of those homes :)

Bryan,

Just so I have the basic assumptions correct this is a 10 space park with one current park owned home renting for $950 per month and 9 other unoccupied homes each in need of significant repairs- to the tune of 100k in total per the seller's estimate.  After making these repairs the plan would be to sell each of these homes for 'several thousand dollars' and collect pad rent thereafter. Current expenses are $1300 per month (water, sewer/septic, taxes (property and 10 homes) and insurance (liability and homes).   Given the above current owner is in the red every month $350 and is asking $475,000 for the park.

If I am mistaken on any of these assumptions please let me know as my comments are based on these assumptions.

From what I am seeing the seller is way out of whack with their asking price. There are two ways to value a mobile home park. CAP rate (how many real actual dollars you put in your pocket every year) and wholesale (value of the property and wholesale value of the trailers). You should never buy a park when sellers try to blend the two. Lets look at both-

CAP RATE- Currently it looks like the park as a whole is in the red every month and as such he should be paying you to take it off his hands.  In asking you to pay 475k for the park he is asking you to pay him for your futue efforts, risk and results (performa).  That is not how it works.  If he wanted full CAP rate value of the park he would have spent the 100k to keep his trailers in good repair, sold them off and taken the pad rent monthly.  

WHOLESALE- This is the value of the raw land, a discounted amount for the utilities and the wholesale value of that one trailer.  Given you will be spending on average 10k per trailer to rehab and then selling them for far less- they are worth nothing and due to the financial risk they are more of a liability.  

So is there an upside on this deal?- Well... it depends. Lets say your plan works flawlessly and you can rehab the 9 homes and get them sold off and you keep the one home as a POH rental. I'm not sure where you got your 'potential income of 8-9k' per month as my math has it at $950 for the rental and 9x$400 for the TOHs for a monthly gross of $4550. Less an slightly inflated monthly expense of $1600 and your at $2950 per month or $35400 per year NOI (assuming no major expenses). At a 10% cap (which is average for a mostly TOH park) the park would be valued at 354K. And since you just spent 100k rehabbing those 9 homes your at $254k purchase with YOU taking all the risk, effort and energy... plus the loss of income while you rehab and resell those 9 trailers which is going to take time.

I won't give you a final opinion on what I think it's worth but would urge caution.  Here is an analogy... I restore old muscle cars.  I get a real kick out of guys who are selling old busted up, rusted out 68 Camaros with no engine, transmission or seats and want 25k for them as they see them fully restored for 40k.  They just don't get it... 

I am just a mom and pop operator and this is just my opinion worth only the time it took me to type it out.  Best of luck

Roger

We have used third party payers in the past.  Usually tenant has something unfortunate happen financially and needs some 'bridge' support to get through the crisis.  A lot of hard working people out there living day to day financially.  Where we have had literally zero success has been when we rent to Section 8 recipients.  Always single females with children.  State pays fairly and checks come consistently but it always breaks down due to 'the boyfriend'- past, current or future.  Tenant starts sneaking them in, broken down cars start showing up, they stop paying their meager portion of the rent, houses get trashed.  Everytime... I am like 0 for 5 on these situations.  Really a shame as they call on listings saying they have been looking for months, living out of a tent somewhere with their toddlers... you want to help but it always ends the same way.  Unfortunate.

Back to the original question though I think the number one way to lose money in a mobile home park is simply buying the wrong park.  We all have had success to certain degrees in our investing and I think that can cause us to be either over confident or too over eager.  We get lucky sometimes in our investments and then we forget that and attribute it to our own skillfulness.  

My wife is an accountant and business consultant and not to say she knows more about the MHP industry than I do but she is the final decision maker.  When I find a park I literally have to make a formal financial presentation to her showing all my research, park's financial history, cash flows and anticipated proforma (and that had better be accurate and conservative or everyone in the room catches hell- including the dogs).  My numbers had better be accurate or me and dogs get sent out of the office with all our tails between our legs.  Anyway... having the ice cold steely eyed final arbiter has been beneficial in keeping my over enthusiasm from creating financial loss.

I bought an empty mobile home park and converted it to a long term RV park.  Water, sewer and power were already in place.  We converted the electrical for RVs.  We kept the spaces at mobile home size dimensions and added storage sheds.  Very successful as residents appreciate the larger spaces for multiple cars and yards (front and back).  Able to charge more with a waiting list.  Snowbirds pay year round to keep space on upon their return.  Small laundry facility brings in a couple hundred dollars per month.  PM me if you want the address so you can google and get a look.

Currently adding two long term RV spaces to another one of my parks.  Running both of one septic tank with single drain field.  Duel post electric which is running me about $3500 having to upgrade one of our park transformers.  All told with groundwork, septic and water should be in to this about 20k for both spots.

 Awesome advice... thank you so much.

Hi all,

Just a newbie question seeking some quick insights on land development.  My brother and I own a simply spectacular piece of property overlooking the Columbia River in Washington State.  Right in town... breathtaking views.  Lot would need to be subdivided for two very large homes or two duplexes.  Obviously we need to do some groundwork with the City planning department and potentially zoning.

We are approached constantly by developers seeking to purchase the property for them to develop (everything from we want to build homes to help the environment to building condos for our 98 year old grandmother to live in).  We are wondering how we could best maximize our return on the property- either by partnering with a developer to eventually share returns or hiring a developer/general contractor/house builder ourselves and managing the project ourselves.  My brother and I are pretty smart guys but this is a venture we would be new to.  

What would you do?

Thanks in advance for the advice.

@Jordan Moorhead what bank loan are you thinking of?  Do you think they would do a traditional mortgage or do are you thinking as I am of a personal loan?  Just curious if I am wrong on this?

So I understand correctly you want to take a piece of land and develop it with mhp infrastructure (water, power, sewer and roads) then build tiny homes to sell to tenants who will then pay you lot space rent for the home.  I suppose there are counties out there that would allow it but it would depend on how they define the structures you are building.  But you would need to go to the planning department and ask.  

As for financing tiny homes as defined are under 400 sq. feet in size.  Going to be hard to get a traditional 15/30 year mortgage on something like that just based on total value.  That leaves you with personal loans and builder financing.  Pick your poison.   

Wesley,

Building parks from scratch is a risky and expensive venture which is why you don't see many new parks being built. For every singular item you need to go right there are 10 things that can go wrong. Beyond the fact you are new to the industry will be tying up your investment dollars for multiple years before you start to see any measurable ROI. Not trying to be Kill Joy but maybe find a good MHP realtor in the area and see if they can find you a nice starter park with owner financing. This is an interesting podcast on the subject.
https://www.mobilehomeuniversity.com/mhp-mastery/the-new-par...