All Forum Posts by: Roger D Jones

Emory-
The 70k valuation is a very, very rough estimate.  Took the annual income from those two trailers less $50 for water each and applied a 35% expense ratio.  Then capped it at 8%.  Alot of intangibles to consider on the expense side but it is just a thumbnail estimate.  

Rog

Emory

Yes- you want to separate the two investments and add the two values together for an offer price. But a word of caution- mobile home park investors buy parks not only for the initial return but for the increased resale value as you improve the CAP rates down the road. The house is going to dampen the value of the park as a singular investment and subsequently the park is going to dampen the value of the house. You will have a difficult time selling the park with the house attached down the road even after you fill it up and improve the CAP.

And a second word of caution since I am sitting here spewing advice... those two vacant TOH homes depending on condition and the 6 vacant spaces should have zero value in establishing the park's value.  Don't listen to proforma numbers on things that the prior owner couldn't do and you shouldn't pay the seller for your future efforts and hard work.  Don't pay for a park's future potential if you are the one who will be doing all the work.

The $70k the two TOH rentals are worth at an 8 CAP probably doesn't cover the drawdown the house value will have sitting in a half vacant mobile home park.

Just my thoughts...

Jaime
As for point #2 you are understanding me correctly.  Tenants know there is maintenance so if you sell them the home the total payment they have to take on (mortgage payment + pad rental) has to be significantly less than what they are currently paying for total rent.  They should be able to see the financial upside immediately.  

And with point 4 yes 18 months is a short window but much of my opinion is based on these being older, 70s and 80s homes (big assumption on my part).  If these are newer more valuable homes than the discussion would have to change a bit.  Either way... you have to give them an immediate financial upside for buying the home.  All goes back to my point 5-  they are not stupid... they will understand what they are investing in.  

Money is transactional... it comes and goes.   Assuming you did not spend a huge fortune in your purchase for those homes- that money is gone.  What you are doing now is changing the nature of your business model and that costs money.  Like replacing remodeling a restaurant you purchase with new interior, grills, fryers and coolers... you are investing in the long term of your business.  

Jaime

What is your financial pain threshold on this?  My point being what is so much is dependent on the age of the homes, what they are worth on the open at a fire sale discount and what are they worth to you?  Personally I am not a fan of sitting on a lot of POH homes for sale at the same time.  Get em sold for what you can as quickly as you can.  Your 'profit' will come when you own and eventually sell an all TOH park.

Here are some additional bullet points that I follow for your consideration.
1- The best buyer is the one currently living in the home.  You don't want to have to do a rehab on a vacant home to sell it.  Consider that when you make an offer to your existing tenants.

2- The price has to be very very attractive to your in park buyers.  They need to see it pencil significantly in their favor to make to buy the home outright. Total cost significantly below their current monthly rent.

3- If you have to 'give them' to the current tenant to get them off your books then do if it makes sense long term.  

4- Don't do purchase contracts longer than 18   months.  You don't want to take ownership of these things down the road if tenant flakes out.  

5- PEOPLE WHO LIVE IN MOBILE HOME PARKS ARE NOT STUPID.  Don't think you can trick them.
6- Some may not want to buy their homes for a lot of very good reasons.  Don't force them out just to sell the home.  Be patient as they will eventually move and you can transition then. 

7- Play the long game and don't step over dimes to save a penny.

Best of luck... just my opinions>

Rog

This is terrible and not legal in any way but it was pre Covid and the rules were a little less restrictive.  Had a tenant fall couple months behind and stopped taking my calls.  I paid a local tow truck driver $100 to stop in front of their trailer with his truck and start measuring his trailer while they were at home watching and then knock on the door and ask if tongue and axles were under the trailer.  

They paid that afternoon and never a problem since.  

Terrible I know but it did send the message I suppose.

Dave,

I was not trying to be flippant regarding the 'management is easy'... just didn't want to get all wordy in my response.  I have a 70% POH/30% TOH park that after 20 years experience have learned to 'rig it' to run right.  I spend maybe 15 min a day engaged in the operation but it has not always been that way.  Learned a lot over the years on managing this park... 

Partnerships make me nervous as for every thing that you can agree on there are 100 things you can be misaligned on.  Every goal, decision, expectation, vision and operational decision has to be lock step with each other- and that isn't even discussing the money side of the agreement.  

What I find a little disconcerting is you (and your family) are putting in all the money and credit while your 'partner' is going to handle the operations.  I don't know how to say this without being too blunt but 'acquiring mobile home parks is hard; running them is easy'.  That is why large private equity firms and buying up parks all over the country... they have great cash flow and don't require a lot of 'management'.  Most parks are owned and operated by out of state or out of the area ownership.  Buy your park; run it yourself; keep all the money.  Plenty of free resources and advice out there to help you.  

All of us who have done this long enough have had our 'plans' go awry on different investments from time to time.  Not knowing the exact age of the trailer there is secondary financing out there for buyers of land and older mobiles that have been moved previously- but it is usually more expensive.  I think you are going to have to lower your price to entice a buyer to bite.   I would not do any seller financing or lease to own deals as you don't want to end up with that home all beat up in five years on a default.

Sell to cover your investment and if you can squeeze out a little more- great.  Then move on with what you have learned and try again.  As my Dad always said, 'There is no eating ice cream in hell- get outta there...

@Dave Rav  I think there are many different types of titles, deeds, etc.  If a bank is loaning on a personal property- car, motorcycle, rv, mobile home they keep the title until it is paid off.  You get the registration.  

For real property and you owe on it you may be the titled owner but the bank holds the deed to the property.  Lot of different terms with varying meanings... 

Mechanics liens I believe are mostly tied to new construction to ensure sub contractors get paid before a building is sold.  Again... I am no expert.  I could be wrong (which is not unusual for me :) 

 I don't think so.  MHs are not real property.  If the home is attached to a piece of property you could lien the property and the attached home.  It would be like putting a lien on someone's truck because they owe you pad rent.