All Forum Posts by: David Benton

Hey Nicholas,

I did a Cost Segregation Study on a property last year which was purchased last year. Can you provide some insight on filing the accelerated depreciation as far as which form and how to apply it and also carry the unused portion over to the next year? Also if I sell the property in 5 years what kind of recapture am I facing?

People buying MHs are looking for lots. We have parks where owners have placed their homes. We also buy homes to place on vacant lots. If your park is at a 9 Cap and a pad rent is $350 and you fill it with a home and convert to tenant owned $350 x 12 x .65 = $2,730 NOI you increase the value of the park by $30,333. If the park is at a 7 Cap you increase the value of the park by $39,000.

Without calculating any equity in the home, as long as you have capital, your costs are significantly under $30,000 and you can recoup those funds, buying a home makes sense. On a 3/2 16 x 80 transportation if short distance and tie down around $3000 and set up $8500. If you pay $9000 for the home and $2000 on additional work you're at $22,500. The limiting factor here is available capital.

The county web site will show you the taxes but remember you have real estate taxes and if park owned homes, taxes on the homes as well. All can be found on most county web sites that are of any size.

Personally I just use rule of thumb numbers for expense ratios to measure a deal and when the numbers are good I request Rent Rolls and P&L up front. If these are good the request for financials are in the contract which are all to be verified during the due diligence period. 

You can work directly with the seller and don't need to work with a broker if you know what you're doing. Another option is to work with a knowledgeable attorney who can guide you and write the contract, but the due diligence is on you. You need to know how to analyze a deal and you need a well written contract plus you need a good management and value add plan. 

If you don't have the experience a good option is to work with a broker who specializes in MHPs. They should be well worth the commission IF they're looking out for your interests throughout the process and are willing to help you through the process. 

One poor decision on the buy can set you back for a long time. You may want to partner with someone with the experience you lack. You'll have to share profits but what you gain should far outweigh the profits you give up.

This can be profitable. Personally I've never bought a home in a park but have a partner on a park that makes a good living at it. He has $15,000 per month NET coming in off RTOs he bought or took over, refurbished and sold RTO and collecting payments on.

Like I said I've never bought a home in a park but have sold them in parks and there are investors who buy them and apparently make a profit. 

@Logan Caudill without even seeing the numbers I don't see this as being very profitable at $450 rents by the time you add all the associated costs (land, homes, transport, set up, decks, utilities and I would use at least a 50% expense ratio and more realistically a little higher). When running numbers I would also use at least a 12 cap rate and I would itemize all costs on paper. 

Another issue is zoning in most areas of the state I'm in that will allow MH use limit density to 4 units per acre for conforming use so if that's the case you would need to divide the parcel. Even when a municipality allows what you're suggesting it's always made more sense to me to buy an existing park because the replacement cost has been higher than the as is ready park. This is one of the reasons you don't see new parks being built. I know areas where the city will approve park development but the the costs don't support it and no lenders will back it that I know of so it's cash intensive to get it started.

@Brenden Mitchum The appraisal was already in review with the bank and I was trying to dispute the appraisal. I was given the info off the comps and at least 3 of the rents they used were wrong. I know they are wrong because my partner owns 2 of the parks they used and we talked with the seller on the 3rd several times and know what the avg rent is. All the bank will do is drop those rather than correct the numbers. 

A private lender will change the returns and we have investors putting up capital that won't like be in with lesser returns. We've worked brokers in the past and never worked out.

@Michael Baradell the flat fee is fine depending on the value the PM brings, your plans and how helpful and active the PM is in getting your goals accomplished. If you're moving quickly filling vacant pads there is a lot of ground work on permits and coordinating set up. Probably have to pay the PM more for the added work. Once the home is ready the manager will be filling with a tenant etc... I would never have an issue paying a PM based on the value they bring. The issue I've run into several times is, the PM doesn't bring enough value to justify the expense. 

Just outside Florence

We have had trouble getting bank financing over and over. We have experience, assets and reserves. We prefer to get seller financing but fewer sellers we come across are interested. We have a park under contract now but the appraisal surprised us as it came in at $1,000,000 and the purchase price is $1,400,000. The appraiser used 13 comps ranging from $150 pad rents to $400. The $150, $175, $185, $200 pad rents are pulling the avg down. This park should easily be at $300 avg but the appraisal came in at $225 avg pad which kills the deal. Any suggestions?