New to Real Estate · Puyallup WA · Member since 2009 · 85 posts · 39 votes
Hello BP,
My wife and I just ran across a deal out of town. It is a 19 unit (4 owned by owner and are on a Rent to own contract, the other 15 are owned by tenants who pay lot rent) mobile home park, the numbers look good, 13% cap rate. Cash flow appears great on first glance. I know our net will be different because we will need to pay for mortgage.
My question before digging deeper into this is.
1. Would this generally be too much for a 1st out of state investment?
2. While doing DD what are some "gotchas" that you've bumped into that we should look at?
3. What are the key questions to ask when I the agent or get in touch with the decision maker/s
4. Is there a different way to figure the value of the property to determine if the asking price is near market?
5. I'm not sure if there is management in place. I know a few people who have had a tenant be like an onsite manager for a discount on lot rent, is that a good route (on first look i like it)
I have a list a questions to ask, I'm just wanting input to see if I'm on track.
Any input, hinta ir tips would be greatly appreciated, Thanks
Rental Property Investor · San Diego · Member since 2018 · 23 posts · 18 votes
7y
Hi Kenny:
I myself am relatively new to Mobile Home Park investing, but I have spent the last 8+ months in a deep dive educating myself, from the Mobile Home University boot camp, to listening to every podcast under the sun on this niche, to reading books, blogs, etc. Here is my takeaway for you on your questions:
1. Would this generally be too much for a 1st out of state investment? -- Depends on your individual situation. But generally speaking, no. In fact, I believe it is generally advisable to only search for parks that have about 20+ lots (for many reasons, but ultimately return on investment). Having the park on city water and sewer will make your life a lot easier, particularly on your first deal.
2. While doing DD what are some "gotchas" that you've bumped into that we should look at? -- Here is a list of potential pitfalls and diligence items:
-Seems like a given, but first thing make sure the park is properly permitted -- certificate of zoning (e.g., legal as park, nonconforming, grandfather)
-Master gas or electric? If so, you may want to run or look at them closely.
-Water: Is it private or city? If city, great. If private, you will want to be very diligent with inspections, et. al. to make sure park is in compliance, past violations, and any future capital expenditures.
-Sewer: Is it private or city? If city, great. If private, same as with water --- inspect and diligence.
-Market: Here are essential macro requirements:
Requirements
Population
100,000 plus
Population Change
Any increase
Unemployment Rate
Under 8%
Median Income
$40,000 plus
Median Home Cost
$100,000 plus
Housing Vacancy
Under 20%
Crime
Use Judgment
-Tenancy: Look out how long tenants have occupied the lots.
-Lot rent: What is the current lot rent. When last raised. Immediately raise to market.
-Many others: I highly recommend you purchase the 30 Day Due Diligence Manual from Mobile Home Park University. Well worth the money.
3. What are the key questions to ask when I the agent or get in touch with the decision maker/s. --See above; review Due Diligence Manual -- it will walk you through it.
4. Is there a different way to figure the value of the property to determine if the asking price is near market? -- Mobile home parks use the income approach. Only put value on the lot rents, not any additional income from park owned homes. Message me and I will share with you a "quick" evaluator for mobile home parks.
5. I'm not sure if there is management in place. I know a few people who have had a tenant be like an onsite manager for a discount on lot rent, is that a good route (on first look i like it) -- Yes, this is the typical management style of mobile home parks.
Hope this helps. Also, here is a list of very helpful resources if you are new and looking at getting into this niche (originally posted by John Jacobus):
The Mobile Home Park Investing Podcast with Kevin Bupp and Charles DeHart
Mobile Home Park Investors with Jefferson Lilly
Mobile Home Park Mastery with Frank Rolfe
Mobile Home Parks in Real Life with Ryan Narus
Websites/Blogs:
Park Street Partners - http://parkstreetpartners.com - This is the investment firm run by Jefferson Lilly and Brad Johnson. They focus on mobile home parks and have solid educational content on their website.
Mobile Home Park Investors - http://mobilehomeparkinvestors.com - This is the LinkedIn group led by Jefferson Lilly. It's the largest group on LinkedIn that is exclusively focused on mobile home park investing.
Mobile Home University - http://www.mobilehomeuniversity.com - This is the site maintained by Dave Reynolds and Frank Rolfe. I recommend subscribing to their newsletter.
New to Real Estate · Puyallup WA · Member since 2009 · 85 posts · 39 votes
7y
@Aaron Olsen this is awesome content! Thank you for taking the time to break this all down. We will for sure check these resources out and will DM you soon. Thanks Again