All Forum Posts by: Ryan C.
Ryan C. has started 1 posts and replied 5 times.
As always, I appreciate the insights and will do my best to buddy up with the seller and creatively get this thing done!
How goes it? I am progressing along in my pursuit of the park discussed above and am uncovering further challenges. One aspect of the deal I neglected to mention initially is the following breakdown of the tenant-owned versus seller-owned homes.
105 Pads
22 Pads occupied by tenants that have paid off 100% of their homes
35 Pads occupied by tenants that are paying off the homes through the seller's separate entity, which holds the title. The separate entity will be included in the sale.
48 Vacant pads with vacant park-owned homes (mostly older vintage), which can be renovated and sold. ~5-10 of which are likely unsalvageable.
The current owner is retirement-age and owns another nearby park (out of my price range) and several other rental properties. Unfortunately, he is not the best at keeping his books. His income/expenses tend to transfer from property to property, so it has been challenging for me to nail down my underwriting assumptions. Although I am confident that I can still make the economics of the deal work, I am having much more difficulty convincing a lender. Coupling the cloudy-at-best books with the 43 vacant "park-owned" homes has only made matters worse. I've kicked around the idea of seller financing, but the seller didn't seem to keen on the idea. I am starting to think that this might be the only possible way to get the deal done.
Do either of you have any suggestions? Is there anyone in particular I should be reaching out to? Is this deal starting to sound like a black hole? Any help is appreciated!
Thanks!
Ryan
Just wanted to start by saying thank you for the insightful response and details regarding my inquiry, but with your suggestions comes more questions. I vehemently agree that while this may be a challenging first acquisition, it will surely be an enlightening one. With that said, I look forward to the challenge as the cards continue to fall into place.
As I conduct my research try to leave no stone unturned, I have repeatedly found that the "warm body" approach is not the advisable route. My concern is that the difference between the anticipated down payment and deployable capital is nominal. While there is potential to raise additional capital through friends and family for a more comfortable margin, it will undoubtedly be an uphill battle given my lack of industry experience. Coupling this obstacle with the age of the existing vacant homes (a good portion of the homes are older than 1976) is the main reason I even suggested the "warm body" approach in the first place. Although I am confident that I can assemble a formidable "renovation team," I am not as confident that the older existing homes will be worth the time and effort to bring online. Is this a huge red flag, or is it common for parks to have a good chunk of pre-1976 units?
Great recommendations regarding market research. I have already taken nearly all of the suggested measures, other than running a "test ad" and reaching directly out to other parks. Fortunately, the park of interest has already checked off several of the boxes you've mentioned: lot rents are well below double nearby apartment rents, vacancy in the zip code (<2%) and county (<5%) are strong, and nearby parks have comparable to much higher lot rents. The next item on my list will be to run the test ad using the listing avenues suggested, and I anticipate an encouraging response pool. The current owner indicated that his ongoing rehab efforts fly off the shelves, but that should probably be taken with a grain of salt.
The last item I wanted to discuss was how other parks handle their sales. I have yet to reach out or conduct any research on this matter, but I know that the current owner holds all of his buyer's notes with fairly high interest rates. Is this a good or bad thing? I know this is a customary practice, but I am concerned that I will not be in a position (at least early on) to hold my tenant's notes.
Once again, I just wanted to thank everyone on this thread for their time. As a first time user of the website and forum, I have found this to be an extremely beneficial resource and hope to continue to get feedback from the incredibly talented, experienced, and helpful minds.
- Ryan
PS - What up Frank!
First of all, is this the real Frank Rolfe?!? If so, I am listening to you on my podcast as I type this! Second, I appreciate your detailed response!
Although it goes against nearly all principals of business, I wanted to start by saying that I love the idea of essentially making a model home and "downselling" from there. Great suggestion, which I will almost certainly implement, if I move forward with the acquisition.
I looked into my state's habitability laws and it doesn't look like there is any sort of buyer/tenant protection. Maybe there is some sort of way to creatively finance and reward any tenants that are willing to come in and fix up their future home. Ever heard of anything like this or have any experience/ideas?
I am still waiting on a full inventory list, but you are right in assuming that most of the homes are older than 1990, so I have ruled out the 21st Mortgage option due to the fact that even the best POH is probably below the $10k threshold.
Hello,
I am a new investor looking into a property that currently has ~100 pads with 57 of them occupied by tenants with tenant owned homes, while the remaining pads all have vacant park owned homes, at varying levels of livability. The price of the park is based off the NOI of the 57 occupied pads with a 10% cap rate and no value is attributed to the other 43 vacant POHs. Basically any warm body I can get into the vacant POHs will add value to the park, so instead of fixing up the units, I was thinking about just selling the existing POHs for next to nothing and charging lot rent. Is this a good idea or is there something I am missing?
Thanks for any help!