All Forum Posts by: Roger D Jones

 I guess the key question is will you be using this property as a 'home base' throughout your nomadic travels and how long would you like to keep this property as a home base?  Not sure about Florida but it can be difficult and expensive to find landing spots for an RV extended periods of time.  Locking this piece of property down might pencil depending your long term plans.

 Hey Joe!
Basically these would be your expenses on a TOH (tenant owned home) park. Property taxes, liability insurance, water, garbage, septic maint., general maint (road, common space, etc) and management costs.  Lets just do a thumbnail breakdown.
* Taxes- you said $500 per year.  Cool- you got that number.
* Liability insurance- play it safe... say $600 a year.  
* Water- if you are not billing it back to the residents most utilities have a base rate then a usage charge over the base usage allowance.  You can call the utility and find out but lets say $25 per month/ per home.  $100 per month.  If you bill it back (recommended) to the residents it would be zero.  If the owner pays it... then you use this expense in your negotation of price- then bill it back once you buy the park.
* Garbage- same as the water.  Say the expense is $100 per month (either 4 individual cans or a dumpster).  Again you would get this billed back to the residents pretty quickly but for now lets consider it an owner's expense.
* Septic maint- Yeah... no current cost but if you are pumping say one tank per year at $300 you should set aside $25 per month on the expense. 
* General maint- road gravel, weed abatement, etc.  Just guess at $500 per year.  
* Management- This one gets over looked alot by new MHP owners because you figure I will just do the billing myself, etc.  But you do travel out to the park every month or so and check on things.  There is a cost to that especially if you are staying over night, etc.  Will say that is zero for now but it is something to consider and add into your expenses as you think things through.  

Right now if my math is correct you are looking at $4300 per year in expenses (if you include the water and garbage).  Without water and garbage your at $1900.

Take that $4300 out of your $12000 gross and your at $7700 NOI. If you are going to tie up your capital on something this small as a TOH park you should require a higher CAP rate of 10-15%. 10% cap puts you at $77k; 15% puts you at 51k. For just the park.

$7700 is not a lot of money to be tying up a HELOC for something this small. Not saying it is a bad deal... just small and once you tie up your HELOC you lose that leverage on another park with bigger returns. One thing I did with my first park is I offered the seller a higher price with a lower CAP if they carried the contract. If I had to get outside financing the price would be lower. It worked in my favor. For me... the best negotiating tactic I have is just to show the seller 'my math' and tell them I need a minimum 10% CAP. Hopefully the seller is paying the garbage and water because once you buy the park and bill that back to the residents your CAP rate explodes as does the value of your park. Adds 31 Bp to your CAP at $77k.

One more thing Joe... I am just a Mom and Pop operator.  No investors and fancy algorithms... Not who I am.  Let me know if you have any questions,

Rog

Joe,
There is a lot to unpack here to answer your question.  Mobile homes are like cars but they do not have a book value that you can determine like a car with Kelly or NADA.  Older homes have almost zero value if you are hoping to sell them and have them removed.  I bought six 1980 doublewides from a park that was closing and paid $500 each for them and that was just to be able to keep the washers and dryers. 

Professional park owners will tell you to only consider the pad rental in evaluating a park investment.  If the seller thinks the rentals are worth more the seller can keep the homes and pay you pad rent and keep the difference.  They won't do it- because they know one of two things.  A) they know how much it costs to repair/maintain those old mobile homes every month or B) they have not been maintaining them and they know what is awaiting anyone who buys them.  

Certainly wait until the deal is fully closed.  Then just a general welcome letter introducing yourself and a little bit of your professional history.  Maybe share your vision for the park and what you would like to accomplish as such.  Be sincere with your plans and don't promise things you won't be able to accomplish.  Simple stuff.  Also maybe give them a heads up that you will be sending out resident information forms and new leases to be completed and returned.  Simple stuff.

That is a very complicated hypothetical.  We do know that per capita income in the colonies was far better here than in England.  We also know that prior to the industrial revolution that individual wealth was driven by property ownership and that the cost of building a home was far less in real dollars than it is now.  To have a home you had to have property and if you were going to build a home it was usually a very nice home.  Those too poor to own property usually lived on the property  of others in shelters provided/rented or lived in rooms rented in the cities. 

Property drove personal wealth- hence the migration west during the 1850s.  It wasn't some great job with matching 401ks that put families into covered wagons just to fight native Americans... it was dream of property ownership.  I don't even think mortgages existed at that time.  

How that relates to a Founding Father's interpretation of a mobile home park is hard to say.  I would imagine they would look at it and ask why would anyone rent a tiny piece of land that barely has space for a home. 

Jon
Responded to your post on the other forum but thinking about it a bit more.  As I said... open a few tanks and check for backflow, visit the health department and ask a few residents if you can.  I have 22 systems in one of my parks and we have replaced three in 20 years.  We accept it as a cost of business and set aside funds for repairs as they come up.   We also pump all our tanks on a four year cycle.  Just part of our expense equation.  One thing to also kind of evaluate is how many family homes you have in the park vs single or elderly couples.  Families put a bigger strain on the systems than single residents and elderly couples.  Might calm you worries a bit.  

With regard to any drug testing I think a good, thorough understanding of both federal and state tenant law is in order.  

My understanding is comparison sales approach or income approach.

Comp Sales approach is getting comps from area and then carving carving 40% +/- off that price.  To use this approach though a bank has to be willing to finance it though- which is really tricky.

Income approach is take it as a rental income stream and apply a very high cap rate and take that value.  Told me double the park cap rate...

My MHP realtor pal told me this years ago so not sure if it still applies.  Looked at one park and told me to avoid it but if I did want to do it to carve it out on it's own plat then sell it off.  Cheaper than trying to sell it with the park at a discount.

Again this was all 15 years ago... so for what it is worth.  Harder to sell parks with houses on them.

Never really thought about it.

Any MHP dealer that you purchase your home through will get you started on the right track with subcontractors to set the home.  One thing to get in the weeds on though (and I am not the expert) is what type of foundation will allow the greatest financing options for prospective buyers.  I did one of these deals years ago and mobile homes were not considered 'real' property unless on a real foundation- at least that it my memory- and it could be flawed.  Also make sure your roof load matches the area of the country you live in.  Good luck and sounds like a great flip investment.