Leasing an entire MH Park?

Question

Hi everyone. I am new to the site here and needed to get some thoughts and opinions on leasing a mobile home park. I have been researching flipping mobile homes, renting them, and also owner financing them. I've read a lot about the Lonnie Deals and that has kind of been the strategy I have planned to execute.

However, I stumbled upon a guy on Craig's List who wants to lease his 6.2 acre mobile home park. It currently has about 60 lots but is completely empty save for one loan tenant( why this person is still there IDK). It use to be about half full but due to not being properly managed a lot of drug activity began to come in and out of the park. So instead of just picking and choosing who got to stay and go, the owner evicted everyone and removed all the trailers.

That was a few years ago and now the park owner has decided he wants to lease the property. He's not too keen on the idea of making it another park but would if the right person came along. I told him about my park management ideas and seems to be coming around on the idea.

I think this could be very lucrative for both the park owner and myself. I would basically run the park(at least till I establish a sort of park manager to live at the park and oversee things in my stead) and bring in qualified tenants. I plan to rent lots, rent mobile homes, and or sale and owner finance the mobile homes. I have limited start up money but I already have 2 mobile homes that I can place in the park to get the ball rolling. I figure I'll mostly concentrate on renting lots just to get some cash flowing in ASAP and then focus on renting and selling mobile homes.

I am supposed to meet him this Thursday(8/6/2015) and discuss some numbers. And that's really where I need the HELP! When I first met up with him he said we could make the lease amount a set number or make the lease based off of how many mobile homes are in the park. He mentioned a tier leasing of some sort as well. Basically I would have a set amount of time to get X amount of mobile homes in and the numbers goes up in 6 month increments. I really don't know what my best option would be here as far as negotiting the lease price. Do I say I'll just pay X amount a month or should I go for the "per MH" route? The average lot rent in that area is $165 I believe. With some changes to the landscape I think I could charge $200 a month. I know those are not high numbers but lots in the state of WV don't rent out for much. The lot rent alone won't make me a bunch of cash(though 60 lots x $200 a month isn't anything to shake a stick at) but once I start renting or selling mobile homes it could bring in some cash.

So what are your thoughts experts? How much should I expect to lease this place for? What sort of questions should I ask him? I'm new to this and have not been able to find anything on the web about leasing an entire mobile home park. Sorry for the book, and I look forward to meeting you all and getting some feedback!!!

Howard Abell · Answer

tI applies to your plan to sell and finance the homes.

Curt Smith · Answer

In Multi Family this deal type is called Master lease option.  The lease is coupled with an optoin to buy at an agreed to price often below market.  Because as with this park, there's mismanagment and problems.

You should listen and ask alot of questoins and not respond with counter offers at first.  Come away, with a due dilligence list, same as if you where buying the park.

Price I would offer would be just on the current NOI, not futures...

The seller is going to want a "down" or optoin fee.

Master Leases often pay lease amount of about 80% to 90% of current NOI back to the owner.  IE leaving you little cash flow.  But for this the buyer gets a good option to buy price and the seller does not have to fund the improvments or do the work.

Can be a win win, or can blow up and the park eat your time and money and defy being turned around.

The lease should have a protection for you, in that if collected rents go down, due to kicking out bad apples, you only owe 80% of what is collected..  To that effect...

Or you could just negotiate seller financing right off the bat.  Seller financing often wants 20% down so the MLO can be less cash to get into managing the park, but typically you give most of the cash flow to the seller.   Unless the seller is not that savy and would take a small portion of the NOI as lease payments...  Start low...  :)

Good luck.

Account Closed · Answer

@Dave Tucker

This is a big undertaking unless its a super market but sounds like this this is not based on the market lot rent.

I think this strategy would work better on a park that is broken that needs repair.  You are starting from the bottom here when you find find a park that would put you in the middle. Good luck

Jarrod Gregory · Answer

Can somebody give a short overview of dodd-frank. My reseach leaves me still slightly confused on what its all about. Thanks

Dave Tucker · Answer

Hey thanks for the great information guys!  I'm just now getting into real estate and still learning as I go. At the present time it appears as though the MH park owner has no desire to sale the park at all. He just wants to lease it, but eventually after developing some rapport with him and after I have enough cash to play with I might be able to get him to sell.

It seems as though he wants me to come up with everything. When I met with him the first time he told me to come up with some numbers and park management ideas and we would discuss it. I am alright on the park management stuff but I'm just not sure what to tell him as far as the money goes. Setting the lease based on "per mh" would help me at first to get the ball rolling but could. I would actually prefer this becuase I would be paying the same amount for a rented lot or a rented mobile home. However, having a set price per month would probably be easier to manage. It could get complicated if I had to pay X amount per lot rented, and X amount per MH rented, and X amount of MH owner financed.

Oh and as far as the owner financing goes I would only do what was legal. The owner finance marketis HUGE in my area. Everyone wants to own their own home but it's hard to get a MH financed for most people. I wouldn't be out to rob anyone. I think people have the wrong impression of owner financing.Some of it is justified but most of it's not.

So what would you all say to a park owner if they said they would lease a park to you? Keep in mind im just starting out here. And I think it's a good opportunity. Thanks so much guys!!!

Belinda Lopez · Answer

Dodd-Frank is not the end of owner financing; you just need to follow the rules.  You can do up to 3 per entity before Dodd-Frank kicks in. Although some States limit the # of Manufactured homes you can sell to 1 per year so check your State rules.  If you go over 3 O/F deals a year then you will need to utilize an RMLO to qualify your buyers and make sure you are D-F compliant.  Network with local Manufactured Home Investors and become friends with a MH Dealer.  The Dealer might be able to help you sell the homes and prepare the paperwork needed.

Also look up John Fedro to learn about how to sell Manufactured and Mobile Homes using executory contracts to "Tenant-Buyers".  None of it is as simple as it should be but that's why you're return will be worth it; learn how to do the paperwork, know your market and get help along the way.  Good luck!

Douglas Dowell · Answer

I see...the original post did indicate both a desire to master lease (no dodd frank) and seller finance Mobiles (DODD FRANK all over it).   I didn't catch that in the original post.

Douglas Dowell · Answer

I am confused @Howard Abell  I am not sure how df applies to a Master lease?  Can you explain why you think it does?

Howard Abell · Answer

You need to do more reading on this subject. Lonnie Deal financing will get you in a heap of trouble. Look up Dodd-Frank on BP and catch up before moving forward.

Leasing an entire MH Park?

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