We have been working on getting a park under contract for months now.. the owner is definitely interested in selling but we are apart on the price mainly due to the fact that almost 3/4 of the 105 spaces are Park Owned.. our goal would be to sell those homes off as quickly as possible.
What steps would someone recommend us taking in order to get the park under contract? We are about a million apart on price and the seller is willing to finance some but has never indicated how much.
Don’t want someone else to swoop in and steal this deal from us!
Greatly appreciate and insight on finishing this deal.
If you are off by about ~1MM then I don't think you will have to worry too much about someone swooping in and stealing the deal.
I think the first thing you would need to understand is how is the seller valuing the park? Are they capitalizing the POH income (which they shouldn't do)? Once you understand how they are valuing it only then can you educate them on why your offer is what it is. For example, if they are capitalizing 100k POH income on a 10 cap valuation, then right there could be your difference ($100k x 0.1 = $1MM).
Ultimately, you need to figure out what the seller's need is and try to fulfill that need, while gently educating them. You never want to tell them they are wrong, just try to provide a different perspective. Back to the POH income example, say you capitalize $3,600/yr income on one POH then on a 10 cap valuation you are buying that MH for $36k. Not many markets will have used MHs worth $36k.
Finally, if you nail all that down and get pretty close to where the deal may work, then you can negotiate seller financing and work the terms to were you may be able to "pay up" for the park but ultimately break even or even get ahead by getting better overall terms than a bank lender.
Hope that helps, but feel free to reach out and I'm happy to help if I can.
San Antonio, TX · Member since 2009 · 3k+ posts · 1k+ votes
7y
@Cody Godfrey Work on building the relationship and getting to know the seller. Once you build trust and establish a relationship (even if it means multiple meetings), then an agreement can be discussed that works for both you and the seller if the seller is truly motivated. Continue to gather information. Both on the seller and the deal. Good luck!
@Mica Moore we call directly to owners. We represent ourselves
I would say that's a bad idea. As a buyer an agent is free -- you need someone with experience ( which it doesn't seem you have) or you might find yourself in bad situations.
@Mica Moore we call directly to owners. We represent ourselves
I would say that's a bad idea. As a buyer an agent is free -- you need someone with experience ( which it doesn't seem you have) or you might find yourself in bad situations.
That is terribly naive statement to make. Nothing in this life is free. Someone is paying for it. You don't have to be member of Mensa to figure out that if you circumvent both, the listing agent and selling agent, you can procure a deal that is beneficial to both the parties.
Plenty of smart and sophisticated investors directly contact the sellers whose listings are no longer active, and try to work out a deal. Bad idea if you don't know what the hell you are doing. Great idea if you are smart and savvy. Cody already seems to have enough experience under his be
Plus, I hope you realize how hard it is to find a realtor who has a lick of experience in MHP.
@Janice V. Janice any advise on what to say when on the phone with owners? Cold call script recommendations? Always find myself getting no’s unless it’s a tiny 10 pad park with well/septic.
@Chinmay J. Appreciate your input! You hit the nail on the head here.. crazy to use a broker when it’s their job to get the best price so they make more money. Only been learning about mobile home park investing since June so definitely not a master but I’m not an idiot either! Thanks J.
Lender · Charlotte, NC · Member since 2016 · 371 posts · 172 votes
7y
Cody, I would suggest to the owner to keep the POH's and do a 2- 3 yr. lease with him on the pads with renewal option. At that point, no worries in the maintenance of the homes. I am guessing the shell value of the homes are minimal?
Specialist · Scottsdale, AZ · Member since 2014 · 626 posts · 700 votes
7y
@Cody Godfrey the advice from Chase and Paul hits the nail on the head here. The seller is capitalizing POH rental/note income, so the easy way to level the playing field is to suggest he keep the POHs. He probably won’t want to, but it’s another way to help the seller see your perspective that the park should be valued by the income from lot rent.
Another perspective you can share is that the income you can really count on is from lot rent where the tenants own the homes. The rest of them have tenants that could leave any time they want, just like an apartment. Your goal is to transfer ownership of POHs to the tenants, so why would you pay for income that you plan to get rid of?
@Paul Sofia actually some of the homes are very nice double wides. Some of them however hardly have any value at all. The owners health is going downhill and we have thought of make him the offer to keep the homes and sell them off himself but, don't think thats something he would be willing to consider. Would it be easier to sit down in person with him to discuss things as opposed to just emailing? The park is only about 3.5 hours away from our main office.
@Jack Martin As I mentioned to @Paul Sofia above, we have thought about this but highly doubt its something the owner would consider.. However, we did share with him an appraisal of another one of our properties about an hour away from his that should shed some light as the the actual value of his park. Thanks for all of your input!
Verde Valley Arizona USA · Member since 2018 · 115 posts · 98 votes
7y
The key is in finding what the seller really wants. Also in educating him about the real value of the POH's. That will involve lots of meetings with him. Why not schedule some time with him over lunch two or three times and explore the issues. This should be a prolonged negotiation. BTW read Chris Voss "Never Split the Difference"
@Cody Godfrey, I think that would be a wise move. That being said, maybe when visiting him, he can assign a value on the POHs and you can set up owner financing on the homes with him. Most older park owners do not know how parks are valued. It can be a tough obstacle. I would see if he has a bank that he has a good working relationship with that can inform him how parks are underwritten to give him more clarity if they do, in fact, lend on parks.
Cody, I would suggest to the owner to keep the POH's and do a 2- 3 yr. lease with him on the pads with renewal option. At that point, no worries in the maintenance of the homes. I am guessing the shell value of the homes are minimal?
Cody, I would suggest to the owner to keep the POH's and do a 2- 3 yr. lease with him on the pads with renewal option. At that point, no worries in the maintenance of the homes. I am guessing the shell value of the homes are minimal?
Real Estate Agent · Las Vegas, NV · Member since 2016 · 589 posts · 275 votes
7y
@Account Closed
you guys hit it right on the head here. Like paul said do a 2-3 year lease with him on the pads and have the owner keep the POH and like Jack said, why would you pay for income you plan to get rid of?