MHP in NY - Buy or Pass?

Question

Hi all,

Looking for opinions on this MHP in NY, please.

Here’s a snapshot:

Pros:

-10 cap

- Value add (77% occupancy, potential to sub meter and bill back water)

-90% TOH

-Decent metro: 100k population, $96k median house price, $1k for 3 bedroom rent

-On site Mgr

-Solid recent rent collections

-The numbers work - good cash flow

Cons:

-Rent control (3% yoy max increase)

-Covid hot spot

-NY not landlord friendly

-18% vacancy in town (May be seasonal)

-Septic - uncertain of age or condition

The top employer in town, a glass and textile manufacturer, may also be tanking; They’ve laid off about 800 people YTD, which is about 8% of the town’s workforce. This is anticipated to have “tremendous negative impact” on the local economy, according to town officials.

With this birds eye view, would you move forward with the deal? Why or why not?

Thanks in advance!

Jen Bastian · Answer

@Jack Martin Great points on the MSA, especially in this economy. It's likely to be all downhill from here at least for the next year or so! @Brandon Cravens I
mirror your thoughts on the septic - Being a newbie myself I've only been
targeting parks with city services until this one came along. The seller is not
offering financing so overall the deal isn't adding up in my book. @Paul Moore I love
the Titanic metaphor, and thanks for recommending Tim, I will reach out to him. @Rachel H. agree
on the mega importance of focusing on collections right now, especially in
NY. Overall I'm following my gut and the red flags on this one and leaving it
be. Thanks all, I very much appreciate your candid feedback!

Paul Moore · Answer

@Jenny Bastian.  When we review a market, one of the main things we look for is positive net population migration. Without that, you may be shining silverware on the Titanic.  As @Brandon Cravens said, I would also be wary of the septic system.

You may want to check with Tim Henderson as I know he has a few potential MHP deals available off-market.

Jack Martin · Answer

@Jenny Bastian two items jump out to me; first the median home price below 100k.  That wouldn't normally be a deal killer, but in NY that just seems awfully low.  Second, the fact that a large employer is laying off workers and may be shutting down.

The most important item in any rental real estate is demand. We always want to be confident that the MSA is heading in the right direction and the outlook for growth is strong.   There are several websites that will give you information on historic and projected population growth/job growth, crime, historic median income, housing costs, etc.

Consider the idea that if the MSA is trending downward, you will not be able to sell homes, fill vacant spaces, or even rent homes in the park.  Demand, demand, demand.  It's akin to location, location, location.

With that said, if your research leads you to be confident that the MSA is headed in the right direction, then it would make sense to make an offer and perform a demand study on the park to see if that lines up with your research.

Brandon Cravens · Answer

@Jenny Bastian What would concern me the most is the septic system.  Anecdotally, I have had problems with every home I have lived in that had a septic/aerobic system.  Of course the money you save by not paying sewage fees may offset the cost future problems/repairs I would, at the very least, have a thorough inspection of the septics and make sure they are sized appropriately for the load they handle and that they are operating correctly. Secondarily, it sounds like the demographics in that area may be trending down. In response to your question, with the birds eye view you provided, I would pass. Parks with private utilities are automatically excluded in my search. I have only bought one, so I am not a veteran.  Not a complete newb having owned mine for 2 years but an actively learning MHP journeyman. @Jack Martin is right on IMO.  Remember terms can sometimes make or break a deal.  If the seller offers financing with generous terms that may mitigate your risk.

Rachel H. · Answer

@Jenny Bastian You may need to look at the current rent roll to see if people are actually paying. There are a lot of people out of work right now. Going forward, know that NY is not the best landlord-friendly state. You'll have to account for holding costs should you need to evict down the road. Unfortunately, many courts across the country are not hearing eviction cases right now since they are deemed "unessential" due to COVID-19. Good luck!

Jen Bastian · Answer

@Chris Pellicone thanks for your feedback and notes - Looks like the vacant vacation is around 10%, so that's a win.

Chris Pellicone · Answer

I struggle w the same concerns. I  am looking in pa instead because of rent control/evictions. Check best places. Net under housing tab to see if vacancy is vacant vacation or regular vacancy. 12-13 percent is the national average

MHP in NY - Buy or Pass?

Most Popular Reply