Seller Financed 200 Lot MHP

[Steven Nguyen]

Investment Info:

Mobile home buy & hold investment.

Purchase price: $1,100,000
Cash invested: $600,000

On-market 200 lot mobile home park
100k down, 100k consulting fee, and 1 million seller financed @ 5 % interest only over 6 years (first year interest is deferred and added onto the back end of the loan)
Highly distressed park with great on-site property manager (electrician and plumber)
Lots of non-paying tenants
Prior owner did not spend any money on CAPEX
35 vacant park owned homes needing repair
20 vacant homes needing to be torn down
City water and city sewer for 190 spaces
Septic and well for 10 spaces

What made you interested in investing in this type of deal?

Value add mobile home parks are a long term passion project
Heavy value add potential - only 35 spaces occupied with maybe 50% of the tenants paying
If park is full, value would be worth around 7-8 million
Mobile homes are heavy on cash flow and forced appreciation especially if infilling lots

How did you find this deal and how did you negotiate it?

Loopnet
Did a 3 day on-site due diligence with mobile home park consultant. After the visit, I was able to negotiate deferred interest payments for 1 year as I fix up the park

How did you finance this deal?

Seller financing - 100k down, 1 million @ 5% interest only x 6 years (1 year deferred interest payments)

How did you add value to the deal?

Hired a rehab crew of 5 to start renovating vacant park owned homes. Renovating about 2-3 park owned homes per month and able to immediately rent them out. Had to evict about 5 tenants and help 4 tenants with COVID rental assistance. Working with Clayton home to infill brand new 3/2 singlewides to either use as rentals or sell via 21st mortgage.

What was the outcome?

Work in progress. Goal within the first year is to break even in cash flow once debt service kicks in. Will bring in brand new 3/2 singlewides for 38k (Tru homes) and rent them out for $700-750/month and cash flow around $230 per month per unit with 0% down since set up costs are reimbursed or sell them for a marginal profit to give my property manager a commission. Plan to bring in 2 brand new homes per month to rent or sell then scale up depending on the demand.

Lessons learned? Challenges?

Turning around distressed mobile home parks is difficult. Labor costs went up and supply cost went up. Renovations took longer than expected. Took about 8 months of blood, sweat, and tears to finally it an inflection point. High fixed expenses for a 200 lot park despite how many lots are actually occupied (i.e - landscaping 55 acres, security, on-site property manager, off-site PM). Park needs to be around 50 homes to break even. Any home beyond 50 is profit.