How does this make sense? And how to approach to get the deal.

Question

Hi everyone,

So, during my research to get a loan for a MHP that I am looking into, my bank and my insurance company recommended me to gift the MH's in this park to the current tenants and rent the spaces to them so that I save money on foreseeable problems (like repairs) since this property has been neglected for several years. I want to know if this is something that I should or shouldn't do.

The situations is that the MHP is located in a 27 acre space with the option to be subdivided in 88 lots but currently there are only 4 MH's and a single house divided in 2 units in this property. The 4 MH's are in poor shape and they are around 30 to 40 years old. The house is in good condition though and is about the same age. The county has an assessed value on these 4 MH's of about $25 for all of them.

Another situation is that the owner is asking for $650k and is using as comps properties with multi-families on them or mobile home parks with the same acreage. But I think that that number doesn't make sense at all since the MH's are worth nothing but just secure immediate pain, I'd need to demolish some other structures that are in the premises and develop the site since the septic and well is just supporting the current buildings. I've been running comps myself finding properties with the same acreage and a single home on it and got similar properties, very close to the area, in better conditions for just above $130k. Is this the right path of thinking? or what would be the right way to approach to the deal?

Thomas Gardner · Answer

Sounds like you're on the right track & I'd ditto Scott above. Also are you really saying the 27 acres is subdivided? Or are we just looking at a county plan that will allow for 88 MH lots on it? Either way you're looking at a horrifying cost to get the infrastructure done. Your sellers valuation sounds more like a "Highest and best use" assessment than a realistic asking price. Unless you can carry this for some time with zero income and a huge capital outlay or have a developer in mind you cal flip this thing to and put a mini mall in there on the surface i'd say steer clear. Or a real low-ball offer that could make the place profitable with the lot rent only from the homes on it now. Sometimes the best deals are the ones you walk away from.

Scott Schaar · Answer

@Jose Lira at the moment you don't really have a park . What you have is a piece of raw ground that has four MHs on it . The guy selling has subdivided the land hoping that somebody wants to buy it for a subdivision for SFH . A MHP does not need subdivided lots . The entire property is owned by one entity and lots are leased in a MHP . If you're trying to develop a new park out of this . Your in an uphill battle . All the infrastructure that's needed would be three times the cost of the raw ground . Just to fill up half of that acreage . Roads electric, water and septics are expensive . I wouldn't value this anymore then a rundown quad in a C- neighborhood . The valuation you gave it is about right . If you were thinking about development. I would reach out to an experienced investor first. Just a thought .

Jay Hinrichs · Answer

TWO thumbs up..  if i could figure out how to put imojis on here i would have had two thumbs up pictures.. this is nothing more than raw dirt.. and as such . not worth a fraction of the asking price.. the ONLY thing it has going for it is zoning if it will actually allow it to be built out as a MHP.. those zonings are getting tougher to find..  absorption  development cost etc. this probably does not work even if you got the dirt for free.

Jack Martin · Answer

@Jose Lira gifting MH to tents is not a very good approach. Most renters are not homeowner material, so if you gift them the home, they won’t take care of it and when it deteriorates to a point where it’s not livable anymore, they’ll simply leave and you will have a destroyed home to deal with.

Selling MH to tenants is the way to do it. Require them to put a couple grand down, make sure they have the ability to take care of the home, and the desire to do so. That will separate the homeowners from the renters. When they have some skin in the game, they’re more likely to have a vested interest in their home AND the park, which is the type of tenant you want.

Rachel H. · Answer

@Jose Lira Not sure if that's the best idea. You may get pushback from the city if the homes end up being condemned. Usually, the city will put pressure on the park owner to get things up to code...including fixing up homes that are deemed condemned. You may need to eventually get rid of those homes in the future if they are in poor condition. Figure in bringing in newer used homes down the road. Good luck!

Jose Lira · Answer

Hahahaha! I know!!! :D

It has the zoning and in conversation with the county, they told me that this is a very rare situation. What happened is that the previous owners (who recently passed) for some reason applied for the MHP use permit on only 5 acres but the county somehow had the 27 acres zoned R-4 (although, as implied, development plans need to be submitted and approved). These happened during the early 80's.

Now when making the current analysis to the land we found that: there is an area at the end of the property that is considered wetland, there is a storm pond in the middle of the property of about 1,000 sf and there is a little chance that the land may be house of an endangered species.

If I am considering getting this property (the 2 parcels) for free or at a very low cost, say, 50 to 70K. Would it be worth the effort to divide the parcels, hold the MHP and tenants as they are on the 5 acres and resell the parcel with the 22 acres?

What do you think?

Jay Hinrichs · Answer

At this point you need to engage a local civil engineering firm to do a due diligence report for you .. taking in all these considerations this would cost 3 to 10k.. and money well spent.. wetlands , If its state of WA is a huge deal.. zoning helps but does not give you a right.

you have to engineer all this.. and septic systems are huge in Western WA. and can be very expensive.. without city sewer and water.. I would think you are looking at doing more like Acre to 2 acre home sites and call it a day.

Jose Lira · Answer

This makes more sense to me! Yeah! Instead of the bank and insurance suggestion. Cool! I appreciate this Jack!

Jose Lira · Answer

Great! thank you very much for your opinion! I can see now how these things enter into play. There is still a lot to learn and I'll do my next diligence to get closer to my decision.

As for now I really want to appreciate everyone for your help so far.

Best wishes to y'all!

Jose Lira · Answer

The parcel with 22 acres is zoned R4 allowing the subdivision for 88 lots. No subdivision and no county plan. The owner is selling as-is, and has no interest on make any inspections, studies, or put any money in the property to sell it. They are asking the buyer to pay any cost associated with the purchase. I am going with the low-ball offer here. A very low one.

How does this make sense? And how to approach to get the deal.

Most Popular Reply