All Forum Posts by: Nicolas Franckenfeld

Thanks Bruce.

One issue I forgot to mention is that the properties are in bad shape, very bad shape, and the owner-occupants are down-right scary.  The homes appear to be at end-of-life.  Normally this wouldn't bother me too much because I don't own them, but I feel as if 1) it would prevent me from getting new/better trailers in the park and 2) if I raised the lot space rent (or even if I didn't) the owners would just walk away and leave me with their pile of junk.

Not sure how I should discount the above or, if it is a deal-breaker at any price.

Apologies in advance for a question that has likely already been asked/answered but I need some quick general guidance as to questions I should ask a potential seller of a MHP. I am meeting with him Friday morning.

Here is the background:

I am a very experienced SFH investor. Never have done a bit of research into MHP investing until now. However, I grew up in the Mobile Home business (family members did sales lots, service, manufacturing) Again I know relatively nothing about parks as investments.

This deal was connected to me via word of mouth.  Seller wants out, after 20 years, as he plans to use the money to build a few small apartments on some vacant land he owns in another town. He says the park has been a "gold mine" to him and his family....whatever his definition of that may be.

Property details:

Asking $218K

10 acres just outside a small town of 6K in the central plains part of US and on the outskirts of a larger .5 million metropolitan area. The property itself is about 2 miles "out in the country" from this small town. 3 miles from a "Super Walmart" :)

23 current mobiles (100% occupancy - but room for more pads)

• 16 are lot only
• 7 are 'owned' by the tenant with mortgage payments to the owner.
• 0 owned by park

I asked him to send his financials and he emailed me a scanned list of the receipts from last month.

• $3750 lot rental
• $2125 mortgage payment receipts
• $5875 gross rev/mo.

A rough estimate of an undeveloped acre of land in the immediate area is about $5K per acre.

No expense information yet, so obviously that is in my list of questions/due diligence.

I know his taxes are <$800 year.

Gravel roads

New DEQ approved septic system

County services (not the nearby town)

What are the questions I need to be asking at this initial meeting?

And as a further step, what kind of numbers should I be looking at for MHP investing that will help me determine a purchase price?

Cap Rate >15%? >20%??%

Monthly gross income/total acquisition cost > 2% higher?

Gross income multiplier <?

New DEQ approved septic system

Again, what types of numbers should I be looking to find answers for and what are those general targets given what little information I am providing?

Thanks in advance.

You really should be shooting for a 10% cap rate (and  greater than 1% rule) in OKC for any property $40-$150K.  Things get a little different though for more expensive properties.

The 'sweet spot' for OKC homes is around $100K full retail.  Rent for around $1000/mo.  Purchase/rehab/require for $80K is doable and you will hit those 10% and 1% marks.

We have been in a multi-year half-hearted search for a SFH in Colorado (we are out of state) where "the numbers work" for renting a place for 9 mos during the school year (Sep-May approx.), and living there ourselves for part of the remaining 3 months.

Our only 'goal' is to be near break-even on the cash flow (assuming a 15 year note for 75-80% of the purchase price).  Based on what we've seen, it is not very likely (unless you get a below market purchase, of course)

Any tips, ideas, contacts, success stories, specific areas, specific type properties,anything that could help make this mini-dream of Colorado summer living possible?

Thanks in advance.

It is so hard to resist those deals that produce great deals on paper.  My better half prevents me from doing it by simply saying over and over "I don't want to own it no matter what the return is"  

In fact, I'm turning down a deal I've been working on for months this weekend. It has a 39+% ROI, a long-term tenant, and a no-maintenance agreement with the tenant, but it is in an area that just is not worth the risk. The lure of 'easy money' is tough to let slip by though.

Fantastic.

I have a similar BRRR model started less than 4 years ago as a newbie and still have a full-time job. (FYI BP has helped me a lot over those 4 years)

Just under 30 properties now owned.  Want to settle at 50 but am having trouble finding deals lately.

Total purchase cost just under $2 million (full retail of the properties is about $3 million), but have only used $150K of my own money to date for those purchases. I found some portfolio lenders that basically allowed me to get started without spending a dime.

**Yes, there are still lenders that will let you borrow based on the appraised value.** I looked at it as an infinite return on my money for those initial properties.  

Like you I am waiting to refi as they are all on ARMs.  Luckily I found a lender who will put them all on a fixed 15 yr note at rates an owner-occupied would get. Going to pull the trigger on the refi process as I watch the rates over the next year.

I can post the details/metrics if anyone is interested, but the point of my post is that yes, it can be done.  Four years ago I knew nothing about real-estate investing, I had a full-time job, had no pile of cash to start with, and was staring at working for the man well into what I had dreamed would be my retirement years. 

Again, congrats to you OP.