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Updated about 2 months ago, 11/07/2024
MHP Partnership Structure
I am looking at an opportunity to invest in my first MHP with an experienced investor. The park is out state and my partner owns two other parks in the state. We are considering doing a 50/50 partnership where he will provide the management/operations and I would provide the down payment. I would also provide a small line of credit to the partnership which I would charge for of course.
Being new to a partnership like this, I would love to hear everyone's thoughts on a fair way to structure the partnership?
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.
Great insight, thanks Richard.
@Avery Robertson great post. I too will be in the same boat here soon. The only difference is goal of my prospective park is for it to be in my home state. I just feel much more comfortable with it being proximal enough to make a quick trip, say once a quarter as needed.
Caution with the statement: "acquiring a park is hard, management is easy."
The only way management is burden is eased is in scenario of all-TOH parks. Generally speaking though, this asset class can be argued to be one other most management-intensive.
At any rate, Avery I'm curious to see what you come up with and the forum's input. Feel free to send me a private message as well.
Quote from @Dave Rav:
@Avery Robertson great post. I too will be in the same boat here soon. The only difference is goal of my prospective park is for it to be in my home state. I just feel much more comfortable with it being proximal enough to make a quick trip, say once a quarter as needed.
Caution with the statement: "acquiring a park is hard, management is easy."
The only way management is burden is eased is in scenario of all-TOH parks. Generally speaking though, this asset class can be argued to be one other most management-intensive.
At any rate, Avery I'm curious to see what you come up with and the forum's input. Feel free to send me a private message as well.
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...
@Roger D Jones thank you for the additional commentary. I've been on both sides of the scenario (majority POHs, majority TOHs) and I've noticed a difference in management demands.
That said, there is MUCH to be said for gaining experience and learning to "rig it right," so it operates with better ease. It's just that those first few years, newer buyers dont have this down.
Further, I do agree with your statements on the intricacies of partnerships.
It sounds like you are taking all the risk and they are doing what a normal property management company would do. What's stopping you from doing it yourself and just paying a property management company if you are taking all the capital risk?
What did you end up doing? I am in the same boat... I am also in ID btw! We should connect!
Hey Kara! We ended up doing a 60/40 split. I definitely see the different perspectives such as Samuel's as far just taking it down myself. I'd be happy to connect and discuss my reasonings further! We just closed on it on Friday. What part of Idaho are you in?
@Avery Robertson Congrats on the close. Sounds like you made a good decision based on your needs and circumstances. Glad it worked out. Looks like we have an Idoho deal here... I live in Clarkston/Lewiston.
Hey Roger, thank you! My partner and I are both in the Idaho Falls area and the project is in Nebraska. He has two performing parks already in Nebraska.
@Avery Robertson Congrats on the close! I'm currently looking at a park in NE too!
Congrats! I would so love to talk to you about this! We were in Eagle near Boise but are now in Sagle up by sandpoint. What about you?
Quote from @Kara Johnson:
Congrats! I would so love to talk to you about this! We were in Eagle near Boise but are now in Sagle up by sandpoint. What about you?
I am in East Idaho outside of Blackfoot. Send me a message and I'd be happy to visit! I love Sandpoint, I need to get up to North Idaho again.
Is your partner charging a mgmt fee? Are you getting all of your capital back first, or is it going to be split 50/50? The same with a refi.Do you get your capital back and then it gets split 50/50.
Gino
Quote from @Gino Barbaro:
Is your partner charging a mgmt fee? Are you getting all of your capital back first, or is it going to be split 50/50? The same with a refi.Do you get your capital back and then it gets split 50/50.
Gino
Gulp....
Some great points by @Gino Barbaro. Thanks
Thanks! I've learned the hard way
Smart men learn from their mistakes
Wise men learn from others mistakes
Quote from @Gino Barbaro:
Is your partner charging a mgmt fee? Are you getting all of your capital back first, or is it going to be split 50/50? The same with a refi.Do you get your capital back and then it gets split 50/50.
Gino
Hey Gino, yes all my capital is returned first in either scenario and then things are split according to our ownership. No management fee.
Quote from @Avery Robertson:
Hey Roger, thank you! My partner and I are both in the Idaho Falls area and the project is in Nebraska. He has two performing parks already in Nebraska.
Hey Avery. Not sure if you knew this, but I am originally from Nebraska. Had I known about this I could have given some possible insights, depending on where it is of course. We'll have to talk sometime, I'd love to hear about it.
- Don Spafford
Quote from @Don Spafford:
Quote from @Avery Robertson:
Hey Roger, thank you! My partner and I are both in the Idaho Falls area and the project is in Nebraska. He has two performing parks already in Nebraska.
Hey Avery. Not sure if you knew this, but I am originally from Nebraska. Had I known about this I could have given some possible insights, depending on where it is of course. We'll have to talk sometime, I'd love to hear about it.
Hey I had forgotten that. That'd be great to visit with you sometime, especially if we look at any other parks.
