All Forum Posts by: Roger D Jones

OK... interesting little deal you have going on.  Couple things first... you really are not supposed to consider your mortgage payment in evaluating your cash flow.  To the seller the value of the park should not be determined by whether you as the buyer have to leverage money to invest.  Now it is absolutely critical that you consider that in evaluating the purchase as you have to stay cash flow positive.  

Your expense ratio seems very reasonable with a park that is all tenant owned homes.  The critical question here though is where is the water coming from (well or city) and where is the sewage going (septic or sewer).  If it is well water you have to make sure that well is healthy and viable for the long term.  If it is septic tanks- what is there condition?  Assume you will have four tanks per year pumped and cycle through the park every four years.  The park has a lot of upside as an investment but it doesn't have the cash flow to cover a well replacement or multiple drainfield replacements.  

Assuming it is city water and sewer and the owner is currently paying the garbage (all good things for you as the buyer) and also taking in 5% vacancy/delinquency. With all that you end up at $18720 NOI. There are a lot of TOH parks that pull in 15% CAPs so to hit that you should offer 125k. See if he bites at that.
 
Year one maybe you don't raise rents but push the water and garbage bills back on to the residents (direct bill on their invoices for services) and then raise rents thereafter.  Pushing the garbage alone you raise your NOI $3600 and the value of the park on resale $24000.  

Interesting investment... I like the little parks and would be all over it if it was in my neck of the woods.

Get it in the leases that if your residents damage the drainfields they pay for it.  Also have it noted that when tanks are pumped (we do it on a routine schedule) if inappropriate debris is found the resident pays for the pumping.  Condoms, tampons, grease, even the rocks from the bottom of a bunch of fish tanks.  We have it in the lease and make them pay for it.

POH rentals can really drive you CAP rate. Staying ahead on maintenance is critical. My wife likes to call them 'lil baby chick eggs'... you have to pay attention to them and take care of them. Best repair is the immediate very first repair. A lot of variables to consider... but for us in situation it has doubled our CAP in the park vs our TOH side. LMK if you have any specific questions... I have made every mistake possible so feel free.
 

 With regard to point 2 it is very dependant on rental demand.  We drive double the cash flow out of our rentals vs our TOH rentals.  We keep them in good shape though and have a maintenance manager hired as an employee to stay ahead on upkeep and maintenance.  Website to submit maintenance requests keeps thing timely.  Even with the labor expense we are way out front.

Infill... ie 'getting asses in the seats'.  MHPs are expensive to develop and then you have to have a plan to get homes on the park.  Very difficult and challenging.  Some park owners use a CASH program from 21st Financial (I think that is the name) to buy new homes in bulk and get them in the park to which you can sell or rent.  It is a Berkshire Hathaway deal to finance the mobiles you buy from their manufacturers.  Very, very time consuming and a ton of paperwork.  Best to buy a park that is already filled. 

RV parks are what they are.  We have had success developing long term RV parks for people who actually live full time.  Ours has a waiting list and the pad rental is better than a MHP.  Developer just put a 40 pad long term RV park in near where I live a few months ago.  It is probably 40% full now.  Location and demographics matter here.

Almost exact same graph for single family home prices for same time period.  There will always be demand for entry level homes particularly if tied to a little bit of real estate.  Always.

Mark and Samuel,
Just saw a brand newly developed MHP for sale in LaGrande Oregon.  Probably some big differences from Oregon to Alabama but you might find it interesting.  Its in Mobilehomeparkstore.com if you are interested.  Saw it last night.

With our two TOH parks we have a resident in each who keeps an eye on things and we do monthly visits.  Our other park is 22 spaces (13 POH/9 TOH) has a 24 hour per week maintenance manager who we pay very well with paid holidays and vacation time.  We take very good care of our POH homes and park in general as we are able to command high rents in due to demand in the rural area we operate in.  We have an website where repairs are requested and handled immediately.  Wife owns an accounting firm so all the rents and financials flow through her company to which I pay for.

I know there is a general disdain for POH homes for MHP investors but given the narrow specifics on this park we get a huge lift in our NOI while also having a well paid employee who appreciates his position with us.

I was just saying build it as a long term RV park then sell.  My uncle did one and at the far end did a driving range.  It was awesome!

I have had good fortune buying empty mobile home parks and converting into long term RV parks.  Everything depends on the park's location.  What is the rental housing market like?  Are there affordable homes in the area?  Are there other RV parks in the area and is everyone crammed in like sardines?  Our success has been in keeping the lot spaces large as for double wide mobiles with yards and parking.  Long term RV residents appreciate the extra space and parking.  You can even have 10x10 sheds put on each lot for additional storage and charge for it.  You can also charge more per month for the RV space typically than a mobile home.  We even have one park that I am expanding a bit that the county will allow me to use one septic system (tank and drainfield) for two RV spaces.  Also have a little laundry building with a washer and dryer that clears a few hundred dollars a month.  Something else to consider I suppose.