All Forum Posts by: Chase Louderback

Due to a scheduling conflict I have on April 19th, this meetup will be postponed to May 17th.  Please keep an eye out for our new meetup post for this event late April/early May.  Apologies for any confusion or inconvenience.

We personally don't worry about the demographic as long as the tenant passes the background check.  We don't have an 55+ age restricted communities though.

The answer in our experience is that it depends on the market.  If you are in a strong market and your park has a good reputation in the area, then with little advertising you could potentially have an organic infill lined up by the time that home is moved from the park.  Parks in areas like this generally even have a waiting list.  

Otherwise, if you are still in a good market, you can order a new home and try to pre-sell it before it gets there as you described.

It really just depends on the market and how aggressive you want to be on your marketing.

We are excited to announce our next monthly meet up on April 19, 2023 featuring our own Chase Louderback speaking on how to mitigate risk in your real estate investment business in 2023!

The real estate market is changing quickly. Rapidly increasing interest rates, record low inventories and the recent banking failures has many investors concerned about purchasing and protecting their assets. This month we will go over some strategies and considerations for navigating the current environment.

Join us on April 19th from 6-8pm at the lower level of the Funkhouser Real Estate Group office in Harrisonburg as Chase shares strategies his business is using to manage risk in 2023!

https://harrisonburgrei.com

*An online live stream link will be shared closer to the event date for those that wish to join and watch virtually*

A lot of mom & pop sellers have such poor books they that themselves may have misplaced the leases or have taken deposits and forgotten about it.  Depending on the deal and your risk tolerance, tenant estoppels can be a solution for that issue.

@Rachel H. made a great suggestion, I would also add checking with local/smaller banks & credit unions.  Generally they will do conventional loans on double wide homes and possibly even single wides if you will be doing a permanent foundation.

Also, I suggest planning on the development & install taking longer than expected as well as the price being a decent amount lower than a stick built home.  Even if you have the permanent foundation and convert the mobile home to real estate, generally they will bring a lower sales price than stick built new construction or even modular homes.

Hi Swis,

For your first real estate/MHP deal, you're likely to get analysis paralysis no matter how you slice it, but this type of deal will especially give you brain damage.  It's essentially a 9 lot park (4 empty and 1 very old trailer is likely a teardown) with 2 houses. 

Valuation:

-Typically we value parks on the NOI from the lot rent only and then pay a shell value for the POHs. If you don't have the expenses, then we apply an expense ratio that's normal for this type of asset (40-45% for well septics). So, if $430 is the current lot rent, then it would be:

Gross Lot Rent x Paying Lots = Gross revenue ---- ex.($430 x 9 paying lots = $3,870)

(Gross revenue x 12) - expense ratio= NOI ----- ex($3,870 x 12) * .55 = $25,542

For an asset that is small and clearly hands on a 10% or higher cap rate in the current environment would be fine.  $25,542 / 0.10 = $255,420 on Lot rent value. 

From there, we would add the POH shell value (what could they quickly be sold for cash for to a buyer) and the home values to it to determine a fair price for the total property.

Now I feel the most important question before you even do the leg work to find out what the shell values & homes values would be is asking yourself two questions. "Does this align with my goals?" and "If I ever had to sell, how easy would it be and who would my end buyer be?"

If it's a solid double wide/mobile home in a good location, then I see no problems with using it as a rental (assuming you will be owning the land as well).  If you do not own the land, then I would suggest selling the home. As @Account Closed pointed out, if you don't own the land and have an uncontrollable amount for the lot rent, then it adds another layer of risk for a long term hold.

Hi Daiken,

Just to make sure I'm clear, you would be purchasing the home and the land would be owned by someone else and leased to you, correct?  If that's the case and your end buyer wouldn't be buying the land either, then Seller financing with a decent down payment and a higher interest rate can be a great option.  For seller financed mobile home deals, you should be charging quite a bit more than what a lender would charge at a bank since generally the end buyer wouldn't be able to qualify for a loan on their own.

The sewer to fall back on can be a great plus.  Have you checked how much it is to connect to sewer? 

It sounds like they are all POH so we would look at the lot rent value as the only capitalized portion and then add a shell value for the homes (which sounds like that is very low). Assuming your $300 value is correct then it would be $300 x 7 (assuming camper lot is similar value) x expense ratio of 0.6% x 12 = $15,120 NOI on Lot Rent Only.

9-12% cap rate would be reasonable for something of this size so $150k-$170k + the shell value of the homes. We look more at the back end equity and cash on cash return so if there is a lot of upside then it may make sense to offer more.  However, for the small deals, they rarely do.  

If their is a lot of rehab on the homes or some essentially need to be thrown away, then that needs to be taken into account for the offer price as well since it's a detriment.  You mentioned it could be rezoned and land is going for way more in that area, so there may be the opportunity to hold onto it for awhile and then sell it to a developer later down the road if your area is growing.