All Forum Posts by: John Arendsen

@Janene Tompkins is spot on. Due diligence is your most critical task at hand. There are a lot of variables in owning a MHP that you don't always see on the surface. You really need to have the park thoroughly inspected by an experienced MHP inspector. Infrastructure and location are the two most vital aspects to consider. 

First, are these really HUD MANUFACTURED HOMES? Or are they MODULAR HOMES. If the latter they should be appraised in the same manner as the SITE BUILT HOMES. If a HUD MANUFACTURED HOME they would most likely not impact the site built properties as they tend to comp to the nearest HUD MANUFACTURED HOME in most cases.

It sounds from your comment, "originally the lots were sold as tract lots", that it may be a sub division as a PUD will most likely have been built in unison with all the homes being close to the same age and from the same manufacturer/s. In any event this could enhance your appraisal somewhat. I would get a copy the HOA agreement and confirm it, however.

Have you done a CMA on the home yourself? I would definitely do that. If the comps are really coming in at 150k you shouldn't have a huge problem with finding a reasonable lender.

But once again if the park/development is not in the path of progress and/or in a blighted and/or run down and neglected area you may have a more difficult time. I would definitely be looking for another HML in any event. There's lot's of cash sitting on the sidelines looking for a place to park if the deal pencils.

You're right about the amount. Most banks want at least a 100k loan origination before they get interested. That pretty much leaves you with little choice but to pursue a HML. Why is a 2001 on a resident owned lot only selling for 50k?

The 30% prepayment penalty is ludicrous. 10 years at 10% with no points seems reasonable. What are the comps in the development? What is the average age of the other homes? How many spaces are in the development? Is it a condo conversion, sub division, planned unit development (PUD), Co-op, etc? Is the development in the path of progress?

Even if the home is in impeccable condition and you actually own the dirt it doesn't mean much if there's a lot of PRE HUD home or if the development itself is in a blighted neighborhood that's going downhill. Unfortunately that's the case in many MH communities nowadays.

OK, the year is good. Is it an original install? If you don't mind me asking where is it located and why are you perusing private funding? If it's a resident owned development why doesn't he just pursue a conventional loan from a bank that funds MH's?

What kind of lot/parcel is it sited on? Is it a HUD Manufactured Home or a MOD? Big dif. What year is it? Has it ever been moved other from the manufacturer or dealer who originally sold and installed it?

Interesting and timely thread as we're going through that at this minute. In fact we have an 8:45am conference call with the listing broker on this very subject. Here's how it plays.

• Asking price 6.999m
• Negotiated sales price 6.7m
• Negotiated closing date Nov. 30th
• Buyer wants additional 60k in misc reparations i.e. mold, dry rot, termites, etc
• We accept counter but want Oct 31st closing due to the timing of a 1031 exchange app.

Stay tuned for the next exciting chapter after our teleconference this morning. It's all such a  predictable game. That's why you always have to anticipate these nuances and build them in to the asking price from the get go.

My 3 cents worth adjusted for inflation.

I might also suggest that if you're new to investing in RE let alone MHP's you may want to consider partnering with an experienced MHP investor/owner/manager. You may not get the ROI at first. But what you fall short of there will certainly be made up for with hands on.

For me any type of passive income investing in MHP's is predicated on the following:

• Vacancy
• Age of the homes
• Area demographics
• Infrastructure
• Amenities 
• Most importantly is the park in the "Path of Progress"?

I always do a history on the area to make sure that it's not in an aging or blighted location. So many of these communities are aging and even failing. That's why they're usually for sale.

Lastly, as @Frank Rolfe so aptly stated "If the comparable rents show a market of, say, $300 per month, then you might well be able to raise the rent significantly enough to come closer to his price". 

Where the former owner leaves off you begin. His rental price point suits his cap rate and ROI but not yours. Your's will have to be re calculated and increased accordingly to positively impact your ROI and cap rate.

This is where most MHP investors fall far short of the mark. In order for the new owner to be profitable they MUST raise the rent and that's where potential challenges may begin. If you raise it disproportionate to the tenants ability to pay it they may bail and then you're dealing with increased vacancies.

Good info to share @Ken Rishel. Dodd Frank certainly hasn't made life too easy either.