All Forum Posts by: Daniel Ryu

@Payton House

Yikes... that sounds terrible...

The power you have is yanking the house out - most MHP owners don't want that to happen.

• Do you have a place you can move the home to?
• Do you know what your overall costs would like?
• Is the home 'movable' - anything over 30 years old might have trouble in the move?

• From a business perspective, as @Lynnette E.mentioned above - this could be a walkaway. Any type of MH investing is tough enough without having to deal with an uncooperative (and unethical) MHP owner.
• The tenant might have recourse by contacting HUD and filing a complaint - I'm sure most MHP owners do not want HUD sniffing around their business - but I have no direct experience as to how that would go.

@Colin Kloezeman

Typically we'd want the lot rent + mortgage to be less than 80% of the market apartment rents.

In research that Dr. Becker, PhD from Duke, did on MHPs in the Great Plains Region, generally the competitive housing for a MH resident is renting an apartment, not buying a home. There are exceptions in markets where housing is extremely constrained and SFRs are quicker to develop than MF.

It sounds like @Matt Bonestroo has some more specific metrics for the AZ market, which is great - always good to hear from those with local market experience.

@Colby Wise

I DM'd you

@Tevin Lavergne

How are you testing demand for a mobile home rental at $1,150 / mo at that park?

If there is demand for MH at that park, is there a reason your likely tenants are not looking to buy the MH themselves?

@Joshua Schoer

Sent!

@Jason Dillard

Interesting point - in the mobile home park world, we're not as focused on the spread of the home; in fact owners will give away homes. We just want to fill lots, rid ourselves of the responsibility of caring for the home, and focus on the lot rent income which drives the park valuation.

It seems like tiny home parks might function more like the MH Dealership model where they're more focused on making money from the spread of the homes they sell.

Or maybe you can do both with Tiny Homes

@Lundy Lundmark

@Mark Turner

The Rule of 60 & 70 are just short cuts to calculate a cap rate based on the following assumptions:

• If you're using 70, then you're assuming a 30% expense ratio and a 12 cap
• If you're using 60, then you're assuming a 40% expense ratio and a 12 cap

Typically listed mobile home parks will trade between a 5.5-9% Cap. These are for 50+ sites. The 12 cap parks would be for smaller, more rural parks, or parks that are less attractive.

An RV specialist can tell you more about RV cap rates, but usually I see listings starting around 8 or 9% caps.

The annual contract income streams are valued differently than the transient (short term stays). 

• When asked during their earnings call about how COVID 19 is affecting their RV businesses, both Sun and ELS (largest mobile home park owner / operators with huge RV portfolios as well) reported near normal collections rate on their long term RV customers; meanwhile their seasonal business went to $0 due to COVID 19 and shelter in place restrictions. Obviously, a pandemic is a very unique situation, but it just goes to show why income from the annual contracts are valued more highly and would get a lower cap rate than income from the transient business (I covered SUN and ELS RV business in a few videos on my Youtube Channel).

The good news about RVs - as shelter in place restrictions are lifted, business has come roaring back. RV rentals / ride sharing sites are reporting 2x demand as people are still skittish about getting on a plane or staying in a hotel. 

@Chris Gavre

Typically the order of preference for financing mobile home parks:

• Agency Debt - Best rates and terms. However, typically $2m minimum size loans, 30% fewer POHs, and the parks would have to be higher quality: offstreet parking, signs, lights, etc. Ask a lender for their Fannie Mae Buyer's Guide (or you may be able to google it) and look up the mobile home park section.
• CMBS - Before COVID, CMBS was a good alternative to Agency. Rates weren't quite as good, longer periods before payoff was allowed (defeasance penalties could be very high), and the nerve-wracking nature of not knowing until you close whether the loan is going through - not sure if that's for all loans, but we didn't know for certain until the day before closing. Not fun... CMBS was more lenient on POH requirements - we received a CMBS loan despite having a high POH count, WWTP and wells.
• Local / Regional - Might be recourse, but can potentially do smaller loans.

I've heard of a few a MHP lenders that will do sub $750K loans - reach out to me if you're interested and I'll see if I can dig it up in my notes.

@Jeremy Blevins

It's a good question - we almost had a deal blow up in our face because the owner got spooked that we were letting tenants / locals know that we were buying the park.

We'll ask the owner before we go onsite if they want the transaction kept private from the tenants. In that case, we'll conduct the onsite diligence as insurance inspectors - looking to insure the homes and the park and needing to inspect.

@Jack Martin

Great overview!