All Forum Posts by: Bruce May

Jason, I have never heard of the formula you presented but I'm sure there are multiple ways to determine the value. The one I provided is the one Frank taught in the class. I've been taught the same formula in other classes I've attended as well. If you have a bank willing to lend then I think that's great. My understanding is that most banks will only consider the lot rents when making a loan.

CAP rates are how commercial properties are valued. A 10 CAP means you would receive 10% return on your investment. The lower the CAP rate, the higher the value, which seems inverse to our thinking. Do a quick internet search about CAP rates and you'll get a better explanation that what I could give you here.

Finally, for about $300 you can submit a park to Frank for evaluation and he'll give you a review of it and let you know if it's work buying. Here's the link:

http://www.mobilehomeuniversity.com/mobile-home-pa...

Thanks, Bruce

Jason,

Contact Brandon Reynolds. He can give you all the details for the next class, which I think is in South Carolina in September. I highly recommend the class if you want to buy a MHP. I recently attended for the second time and I'm still looking for the right MHP to buy, so by no means am I an expert at this.

As for the park you are considering buying, it really looks like you are overpaying. There are a couple of factors you have to consider. First, value the homes at about $5,000 each or $40,000 total, maybe a little more if they are newer and in really good shape. More than that and you over paying for the trailers.

Next you have to factor in the lot rents. You didn't mention how much the lot rents are, but with your numbers it looks like each tenant is paying about $635.00/mo for rent (trailer & space rent combined). The basic formula is: # of units X 60 X lot rents to give you a basic value at a 10% CAP rate. You shouldn't include the rent payed for the trailer, just the space rent. So if your 8 lots rent for $200.00/mo it would be 8 X 60 X 200.00 for a value of $96,000. Add that to the $40,000 and you should only be consider a purchase price in the ballpark of $136,000, give or take. You might be paying 2.5 times that for this park.

If the tenants pay for their own utilities you change the "60" in the formula to "70". Be careful with septic and wells as well. There's a whole lot more to consider, but know that MHP's are not the same as other asset classes.

Good luck, Bruce

@Richard, sorry to hear about these tenants. I haven't heard of KTS but I used Daniel E. Marshall  for my last eviction upon referral from a friend. He's a bulldog of an attorney but I think even lawyers have their limits within the law. Best of luck.

@DJ Smith, If you are working directly with the owner and not a broker you can use any agreement you and the seller agree upon, but there are so many factors to be aware of with mobile home parks that having a good contract will be the key to your success, especially if you plan to wholesale the park or assign the contract.

I agree with @Belinda Lopez, don't use a contract for a SFH. These niches are very different. I don't have a contract to share with you, but someone on Bigger Pockets should.

Thanks for sharing such a great transformation @Brian Burke  . I have done one hoarder house and it was no where near as bad as yours, even though I too found a possum inside that had recently died. I appreciate all the details you provided to transform this house into what it is today and I hope it sells quickly for your asking price.

Nick, I like your letter and I think I would add that you have money for a down payment and are looking for owner financing. That might appeal to the right owner and cut down on the tire kickers who want to know what you will offer. I've also seen the successfully done for self storage units.

Bruce