All Forum Posts by: Roger D Jones

Quote from @Fred Scott:

@Roger D Jones:  Any insights on why the North Carolina purchase in Fund IV makes you nervous?

They paid 3.7 million for this property at 29% occupancy.  Park has experienced a mass exodus over the last 20 years with no explanation why.  Their plan is to raise rents (on the poor remaining souls, improve infrastructure and exert some sweat equity.  How are they going to fill the park?  "Leverage infill opportunities"... Typical PE investor double speak.

Well... they are who they are.  The PE investment feeding frenzy that started up 15 years ago as TOH parks started getting gobbled up is starting to slow as supply tightens.  This feeding frenzy has driven up park prices and there are fewer and fewer Mom and Pops to take advantage of.  The big stuff is gone and if anything does come available Mom and Pop know what it is worth.  I question when these PE groups start wanting to unload their newly inflated parks who is going to be willing to purchase them with no further upside.  

There North Carolina purchase leaves me scratching my head.  When PE investment groups start using terms like 'sweat equity' on near empty parks I get nervous.

Quote from @Joel Montoya:

Hi there! I’m a contractor with a couple single family homes for rent. It’s getting very pricy in my area so I’ve also been looking into investing in mobile homes. There’s a lot of content on YouTube. Someone there advised to buy 1976 or higher. I think this was to ensure your buyer can qualify for a loan. Good luck!

Prior to 1976 they were considered pre-HUD. Small windows, aluminum wiring, etc. All kinds of restrictions on selling, moving and financing. After 1976 trailers were considered mobile homes and standards were upgraded. That is mobile home park investing day one, first period lesson plan.

Quote from @Melanie P.:

Quote from @Carl Rowles:

I appreciate the response, Roger. Part of my calculations does figure in vacancy, repairs, and capital expenses. Are mobile homes more prone to these issues than a typical SFH and I sure increase those allotments?

 Carl, There are nice mobile home communities that include the parcel of land under the home. These homes tend to individually appreciate over time and are actually not bad places to live.

The places with the lot rent you have to decide if you want to be in the mobile home business and buy the park. Then you wind up with units in your park that default on lot rent and cannot afford to move the trailer. Most trailers cannot be moved or would cost more to move than they are worth. So, if a developer comes along and buys the mobile home park you will lose your entire investment. This does happen. Almost any use of land is better than a mobile home park - which is why most of these parks still around are in far off areas.

 Melanie 
I am not sure I would concur with your statement that any land use is better than a mobile home park.  Large investment groups and small investment groups have been scooping them up in batches over the last ten years.  Carlyles, Blackstone, Sam Zell and Apollo to name a few of the big dollar groups.  I get three calls a week on each of our parks from groups looking to buy and they are each far from any metro areas.  I would proffer that though that no one is building NEW mobile home parks with some exceptions for long term RV parks which continue to be developed.  Existing mobile home parks are in high demand for all investors large and small.

Quote from @Carl Rowles:

I appreciate the response, Roger. Part of my calculations does figure in vacancy, repairs, and capital expenses. Are mobile homes more prone to these issues than a typical SFH and I sure increase those allotments?

 Carl
Sorry about my vacant response above.  It was early and I did not think my communication was very clear so I tried to delete the post but I guess it left your 'quote' in place.

So to answer your question- Yes.  Mobile homes are much more susceptible to repairs than SFHs.  Mobile homes are 'baby chick eggs'.  Everything is smaller, thinner and cheaper.  Water is the root of all evil.  I own thirteen mobiles in one of my parks and the only way it pencils is that we A) take very good care of the homes staying ahead on the maintenance, B) Rents are high in the area so we can charge $550 over the pad rent which is $450- so $1000 per month.  

You can look at a mobile home and see it as an easy rental with new carpet, trim and some paint but there are other bigger uglier expenses that can come up.

Roof Replacement, soft floors (water damage) in kitchens and bathrooms- most floors are particle board, exterior door replacement (special order), underbelly insulation falling, bad hot water tanks with rotten floor underneath (real joy), bad windows (water again), bad bloated siding (water), water damaged base frame around perimeter of home, cracked tubs (special orders) and frozen pipes (Good luck finding a plumber to come work on a mobile home- they do not exist). Now your husband may be willing to take these on but that is not much of a life for $500 per month. If you sub these out you will be wiping huge chunks of your annual NOI.

Now I not saying to not take the deal... just go in with eyes wide open. 

Quote from @Carl Rowles:

Quote from @Roger D Jones:

@Jason Velie is right.  Cash flow is a trickle with a lot of hard work.  Find a park a distressed park, find some distressed trailers, put your husband to work.  That is what my wife did and she is loving the cash flow.  

Hi Carl. 
Sounds like a nice trailer with a lot of potential.  I own 13 trailers in one of my parks and I will tell you they are like baby chick eggs and we treat them like that.  So say you are into the trailer $12500 by the time you get ready to rent.  Lot rents could climb to $500 eventually and you can rent it for $1200.  You have taxes and insurance so that pulls another $100 per month- so you clear $600 per month.  Not bad... weekend vacation money.

But here are some of the things that can disrupt that.  Water leaks, problems under the trailer ie insulation falling, a tub cracking, a new roof, frozen/cracked pipes (usually in January- and plumbing companies simply will not respond to mobile homes), rotting siding, bad exterior doors etc.  We had a tub break and had to remove the entire end of the trailer to get the new one in.  I guess what I am trying to say is everything pencils in a perfect scenario with nothing going wrong.  And every time you get a new renter... it's four or five days fixing the place back up.  So yeah the $600 per month gets you and your husband a weekend away but you will be losing some weekends 'down at the park' also.  

Again- doesn't sound like a bad deal and if it was in my park I would buy it too, but then again I get the lot rent also.  Just some food for thought.
Roger

 So if I bought one for $7,500, and it probably needs a few thousand dollars of work (more than 1, less than 10). But it's a 3/2 and I think I could rent it for $1000-1200, has a lot of NEW things already in it (AC/heating, kitchen cabinets, appliances, flooring) but bedrooms need to be finished remodeling.  Lot rent is $365 and includes water. Can I still do simple 4 box calculation? 

@Jason Velie is right.  Cash flow is a trickle with a lot of hard work.  Find a park a distressed park, find some distressed trailers, put your husband to work.  That is what my wife did and she is loving the cash flow.  

A whole lot to be wary of- well, lagoon system and then those POH trailers.  Some serious baked in costs for each.  Sixteen homes to inspect- roofs, hot water tanks, soft floors, siding damage, decks, porches, furnaces.  One of our parks is 60% POH and in my experience the only way that park pencils as well as it does is to get through all the major repairs, get the homes 'right' and then keep them 'right'.  That means weekly on going preventative maintenance fixing small problems before they become big problems.  Usually with an on site maintenance handy man versus the heavy costs of commercial services.  

We all see a lot of these parks for sale.  Grandpa and Grandma take five acres on the back forty and punch in a well and sewer (when it was cheap to do so), run some water and sewer lines with the old backhoe.  People start moving in with their TOH homes (back in the day when everyone could afford one) and the park starts to fill up.  Eventually people die off and the homes go up for sale cheap, get abandoned and the park owner picks em up cheap and takes in the extra little bit of cash for the POH rental.  Eventually the park gets heavier and heavier with POH units.  Years go by and eventually Grandpa gets tired of fixing porches, nailing gutters and steam cleaning carpets that 'have a couple more years in them.  Wants what he thinks is a market price for something but doesn't understand the albatross he has created over the last 20 years.  The owner took the back end profit for his park during the life of the POHs now wants to cash in again.  

Now maybe I am wrong and all the POH homes are spectacular and very well maintained with new roofs, furnaces and no water leaks.  Every situation is different... but if those POHs are busted up the park is worth only a fraction of what he is asking.

All of you, in all your wealth, pressed shirts and fancy headshots squealing about $175.  Just explain to her you can't cover every utility outage, then credit her the $175.  Be a human being first, a landlord second and an investor third.  Your sunrises will be a little bit brighter.

First off... separate the two entities. Mobile home park and house. Value the house on it's own with comps and then run the CAP on the park for it's value. Don't be overly optimistic. Once you get two numbers add them together then take 20-25% off the top. MHPs with SFHs are albatrosses unless you plan to live in the house and live there forever. One of the key upsides to MHP ownership is building the business and selling it for a profit down the road. Having a house attached makes that much more difficult. A major majority of MHP buyers are multi park owners or PE investors neither of whom are interested in POH trailers let alone SFHs attached to the park.

Your buying something that will be tough to sell.  What your pay for it needs to be reflective of that.  Take your 100k and find a straight up park with seller financing.