Luck of the draw, found something for sale - Now what?

Question

I'm a new start-up investor and I've always heard of how lucrative mobile home parks are, but never have been interested because I've never come across any for sale nor have cash nor know much about them.

Except now an opportunity has jumped in front of me and I've learned to seize things when they come.

But I don't know where to start. Luckily, I've found the greatest source of knowledge ever - BP. Here are the details;

It's part of an inheritance in divided by six cousins. Dividing the income by six isn't all that great so they want to sell it.

Rent is collected a couple times a month. Each unit averages to $310/mo. average expenses are: 
water;300/mo, 
electric; 356/mo,
 trash; 185.74/mo
Insurance; 106.16/mo
Cit sales; varies
 There are 14 spaces in all, plus a 15th which is larger than the rest. the 15th was bequeathed to them by the previous owner who had built it out and occupies two lot spaces. 11 spaces are occupied and tenants own their own mobiles. 4 for over 15 years, 2 for over 10, 3 for over five, and 2 for over one. The non-occupied spaces have 1/bed mobile homes which would be included in the sale. There is one woman who has lived there for 15 years and manages the place and collects rent in exchange for free space rent.

My questions are; what are the best sources of information about owning mobile home parks? How does one go about determining the value of the park? Does the size of the whole park matter? What questions do I need to ask?

Most importantly; How would you, if you had no cash or income, go about acquiring and KEEPING this place? I figured some things like asking them to carry half on a second lean, then getting the vacant units signed on a rent-to-own or purchased w/ owner finance to increase the value of the whole property and raise a bit for a down payment, but at the end of the day, it's all I got.

Thank you veterans of BP!

Also, perhaps this is the wrong forum to post this, I'm not sure, but it would be nice to know of possible end buyers to assign the contract to if need be.

Eric S. · Answer

If I was selling a mobile home park for half of what I originally wanted to sell it for, there is no way I would accept liability for "preexisting defects".  If they are selling a profitable park, they are probably doing it to get entirely out of the the business of park ownership, not to have a preexisting problem pop up a year after the sale.  Just sayin.

Keith Canyon · Answer

dovid, don't know if its just me...but, i had a problem following your thought processes.  can you back up, and relate the information again, maybe break it down, or clarify some more?
my apologies if i can't follow along on this one.

sage

Dovid Staples · Answer

again thanks for the advice. Apparently the sewage pipes and things had been replaced nine years ago by the owner right before he died and three years ago the water pipes had a leak from calcium buildup and were replaced. I would still want them to sign that seller is responsible for any preexisting defects to the pipes at the date of sale. Could I do that?

I also had him send over the 2010-2011 income and expense statement with the EOY projections. putting in an imaginary %10 vacancy rate (though it doesn't seem like anybody is going anywhere), plus 696 in made up expenses (I counted the lady who would manage in exchange for free rent plus 386 for...something) and the NOI comes out to be $20586 per year. Considering the four mobile homes that would come with the property, I figure a reasonable price would be; 
150-170k? 
A far cry from the 300k they were trying to get a while back.

then I think how can I finance it? Even if I find someone willing to finance long term based only on the asset Id have to come up w/ at least ten percent. So perhaps while in contract get the four other homes sold for 6,000 down and the rest financed for 1-2 years? and to make it lucrative offer a year or some odd of free lot rent. Would a realtor be willing to market a mobile home? Say i worked out that he gets a thousand for each home. That would leave $20,000 of their downpayments for my downpayments.

Does this make sense? or am I just being young and cocky again.

Dovid Staples · Answer

Aye, thanks Keith and Steve. I didn't think about possible sewage issues. Luckily they do have one representative so it's not all six. AZ comps are pretty low. I of course will gather as much info as I can (about the property and advice from BP members) before putting in an offer, then it's a matter of what the heck do I do next...

Steve D. · Answer

Dovid (apologies, I previously addressed you as 'David'),
I didn't see taxes or maintanence in your expense estimations...but rough numbers tell me a target price needs to be south of the 150k mark, especially if you are able to get the sellers to carry some of the financing. To get a RE valuation you'd need to find some comps in your area, and if you are in AZ my guess is they would be low, but you need to do the due diligence. the more information you are armed with the better your leverage will be with the sellers.

Keith Canyon · Answer

oh, one other thought...
when i started talking with my seller regarding his asking price, i asked him what he'd take for an all cash sale (not that i had all cash, or any cash).  after waiting the long moment of silence, he came back and dropped his asking price by 35k.  just found that to be interesting.

sage

Keith Canyon · Answer

dovid, good questions!  i've got the mobile home bug, too, and am currently in discussion with one owner.  i don't have any cash to work with, and the owner is facing a loan renewal deadline, so i'm kind of running out of options, i think.
a couple thoughts i had:  i would ask your party of 6 to choose a representative, so you are at least only dealing with one main person with discussions, and not all 6!
what i'm hearing from some mobile home park people is to do your due diligence...especially when it comes to sewage and septic systems.  find out as much as you can about the waste systems, how old, when last pumped, when last inspected, any past problems reported, etc., etc.  that seems to be the one underlying issue ($$$) that comes up every time i mention to someone i'm looking at mhps.

best of luck,

sage

Dovid Staples · Answer

At first they were asking 300k, but they were since convinced by the family member representing them that it was too high a price. Now they're asking to "make an offer"

Steve D. · Answer

David,
I am not involved in any MHP's but I've been interested as I like the concept of being primarily responsible for mainly just the land and not the toilets :). That being said, we would need to know the offer price on the property to evaluate the surface before digging deeper into financing options, assuming primary the analysis makes sense. I can tell you that inheritances controlled by this many people could get complicated as reaching concensus on a price and terms will need to be sold to 6 parties and some are likely to have illusions of granduer as to the value. Just my two cents...good luck and let us know what transpires.