All Forum Posts by: Jefferson Lilly

I don't believe your youth can be held against you. Laws regulating the age of mobile home park residents are just that - they place restrictions on who can actually *live* in the mobile home. You'll not be living in the mobile home, so you are free to purchase it. Heck, once you own it, you could haul it out to some other MHP - or put it on your own land. I do not have exhaustive knowledge of age restrictions in all 50 states, but I do have extensive experience with one of my consulting clients here in California - one of the most regulated states. And the 'only' restrictions are on actual residents of the mobile homes, not the owners. OK, so that's a long-winded way of saying "just go ahead and buy it, but I still think you'd be better-off being very above-board with the park owner about what you are doing." Who knows, you may find the park owner points you to a few other good deals in the community - or to another community they own with similar homes. In fact, we would welcome someone like you working in our parks in Kansas and Oklahoma. Let me know if you might like to have a discussion about that. One other thought: many MHPs that say they are age-restricted, aren't. They are just practicing age discrimination without knowing it. To be a legal 55+ MHP requires certification from HUD. Ask your park for a copy if their certification to be an age-restricted community. If they can't produce it, they are likely not really a seniors park. In which case, you could put anyone of any age in your home. But again, it's best not to ruffle the feathers of the park owner; work with them, not against them. As regards Dodd Frank and SAFE: I believe everyone is allowed one of these sales per year without being subject to the burden of becoming an official Mortgage Originator. Further, structuring your deal as a Rent Credit agreement (similar to RTO) is generally regarded as being not a mortgage, and hence is not subject to Dodd Frank or SAFE. Finally, HR1779 is making its way through Congress and if passed, it will specifically exempt manufactured housing. My 2 cents worth, and good luck with your new adventure in mobile home investing, -Jefferson-

Many MHPs, regardless of whether they are age-restricted or not, place limits on sub-letting.  You best bet is to go to the manager (or better yet, to the park owner) and explain to him/her that you want to improve their park and tenant base by improving one of the mobile homes.  You need to get their approval for what you are wanting to do.  Honesty is the best policy.

Good luck,

-Jefferson-

MHPs are outstanding investments when properly managed and not overpaid-for.  I learned the business from Frank & Dave and their predecessors at Mobile Home University.  I've acquired 3 MHPs over the past 7 years and am raising money from investors/co-owners for my 4th property.  Even though we generate returns in the mid-teens for our investors, there is still profit leftover for my partner and me.  Get educated about this unique business, and then tap outside capital to scale your operations.

Your mileage may vary, but that's my 2 cents worth,

-Jefferson-

Jack -

You need to spend 30 - 50 hours getting educated about the quirky niche of mobile home parks.  The materials and 3-day long Bootcamp at mobilehomeuniversity.com will be your fastest and best-quality path to getting educated.

But briefly, a small park like this will trade for 60 - 70 times the monthly lot rent at best.  I do not see anything in your description that discusses the lot rent.  It sounds like the mobile homes are all owned by the park and rent for $435 - $500.  Look at competing parks, and determine what is a reasonable lot rent.  Multiply by 60 if the park pays water + sewer, and by 70 if not.  The reason for the lower 60x multiplier is that the cash flows are worth less if you are paying the utilities.  If not, then each pad is worth 70x the monthly lot rent.  (And who pays water?  Is this property on a well, or is it on city water?)

Then value the mobile homes for what they can be sold for on a note in the park with $1,000 down.  Run some test ads on Craigslist to gauge market interest.  You want to get out of the business of owning (and, hence, maintaining) the mobile homes.  Given the low rental amounts quoted above, I suspect the mobile homes date mostly from the 1980s, in which case they might be worth $5,000 - $7,500 each, tops.

Then add the value of the single family houses (ask a broker for comps; find out if they can be parceled-off and sold after you acquire the property).  

Adding up the value of the 

1) real estate, 

2) wheel estate, and 

3) SFHs 

... will give you the total fair market value for this property.  Small properties like this trade at a discount.  There will not be many buyers for such a sub-scale business.  You, by virtue of being so close, are the ideal buyer, and there will not be many 'yous' out there for this property.

FYI, I tend to stay away from septic entirely.  You could go bankrupt in a month if the system fails and you do not have deep pockets (or a willing bank) to help you upgrade.  This is yet another reason a small property like this will trade at a discount to a larger property on city water + sewer.

If everything checks out well during your due diligence (e.g. this MHP *is* on city water, and the septic checks out 100% by an expert septic inspection company [don't use just a regular plumber]), then my gut tells me this property is worth closer to $275,000 than $400,000.  Make an offer that works for you, not for the seller.  It's already been on the market a while.  Write up an offer (with contingencies for you to get out if the due diligence or bank financing does not come through) and deliver it to the seller.  Lock up the property while you conduct your diligence and really see what this is all about.

My 2 cents worth,

-Jefferson-

His asking price is WAY high. Small mobile home parks have a limited number of buyers. Most of us want larger parks (aka manufactured housing communities). Plus, if you make just a single trip to the trailer park (if you don't live locally) the airfare, hotel, etc. can wipe-out 10% - 15% of your annual profits.

A good rule of thumb is that small mobile home parks like this will have a 40% expense load (if no park-owned homes), and at that, you shouldn't pay more than a 12% cap. So that values this park at $34,200*.6/.12=$171,000.

It is a very bad idea to 'keep one lot open just in case.' The name of the mobile home park game is providing affordable housing to good folks in need, and generating cash for yourself. I suspect the seller is just making up a story about why the lot is vacant. Perhaps the utilities are not installed on that lot? Perhaps the economy is bad? Perhaps he's just been too lazy/inept to buy a mobile home and bring it onto the lot...?

Good luck to you!

-jl-

As an investor in both mobile home parks and mobile homes, I can assure you there ARE mobile home parks that will give you a mobile home for free. *Mine* is one of them. I have a mobile home right now that I am trying to sell for $1 to someone who will fix it up and rent it. I also have two dozen 'turnkey' newer and renovated mobile homes that I would sell to investors for $15,000 - $23,500 a piece. This is a good business for all. As a park owner, I still collect my lot rent. The new homebuyer gets a solid investment and I service the home (collect all your rents and mail them to you, post all late notices, arrange for any needed evictions and repairs [investor reimburses me for actual out-of-pocket eviction and repair costs - nothing for my time]). I've been doing this for years, and so far, so good.

My property is in the southern Oklahoma City area near Norman (where OU is). Anyone interested?

-Jefferson-

James -

It seems thin on profits given the high lot rent and high price they are asking.

That said, you might consider purchasing the home and moving it to it's own land. Depending on zoning, you'd need .25 - 0.5 acres of improved land (water/sewer/driveway/utilities). You'd probably gross a similar amount, perhaps more depending on location. If you permanently attach the wheel estate to the real estate, you'll probably qualify for a regular home mortgage. For that matter, a buyer might, and then you could be taken-out for cash. Or finance it yourself and keep the income. But consider moving it (or similar/cheaper) home to it's own land.

To your continued success,

-Jefferson-

George -

Understanding the P&L by each line of business will be critical.

For instance, mobile home park revenue streams are much more stable and valuable since MHs are not really 'mobile.' They cost $3,000+ to move. So they rarely do. You might see my detailed article I posted in my LinkedIn Group - Mobile Home Park Investors.

RVs however have an engine built in (or are easily towed by an ordinary pickup truck), and they come and go all day long. These streams of cash are valued much lower.

The rental cabins are an entirely different animal all together, as are the boats.

If I were looking at this deal, I'd consider buying it all (if it is really that good of a deal), and would then sell-off the cabins and boat business.

Your due diligence should consist of getting:
1. The P&Ls for the past 3 years - broken out by business line. Then verify this by:
2. Getting a copy of the seller's previous 3 years' tax returns where he/she declares their revenues and expenses to the IRS, and
3. Calling the bank where the rents are deposited and the expenses are paid. Verify, verify, verify.
4. You should also talk to the manager and assess his/her motivation and competence, but also consider changing his/her compensation structure to encourage home sales, etc.
5. I'd also drive through the property to get a feeling for how rough it is. Poor is OK, but real 'bad element' stuff like gangs and drugs is just more than most people would want to deal with at any valuation.
6. Have the infrastructure inspected. Be especially leery of orangeburg sewer pipe (in use through the 1970s). Understand if/what wells and sewage treatment equipment you'll need to operate. All-city utilities are best as they save you headaches and expense.

As a general rule, MHPs are valued at 60x - 70x the monthly lot rent, plus the value of the individual mobile homes. Do not apply a cap rate to the income from the 'wheel estate.' Only do that to the 'real estate' - but again, the 60x - 70x multiples will get you close.

I'm a MHP owner and a consultant. I'd be happy to spend a bit of time with you on the phone gratis to see if/how I might help you.

To your continued success,

-Jefferson-

Omar -

Would you consider master-leasing your mobile home park? I would be interested in leasing it with an option to purchase it down the road. In the interim, I'd invest my own capital, bring in mobile homes, rehab some of the ones you have, and provide a steady income for your mother with no management hassles.

Any interest in talking?

-Jefferson-

Empty lots are worth $0. It is too much work to find, move, rehab, and rent a mobile home to fill a vacancy. The rent/RTO from the home itself is barely enough to make it worth while. You do not want to pay a 30x multiple for the land underneath it. The land of a vacant mobile home pad is worth $0.

The 60x (off city utilities) and 70x (on city utilities) multipliers of monthly rent are correct.

The correct way to value a MHP is the lot rent multiple, plus the FMV for the individual mobile homes (not a multiple of their rent). 1970s 'beater' MHs might be worth $1,000 - $2,000. 2000-and-newer MHs might be worth $20,000 - $25,000. Find out how much your local market will pay for the mobile homes based on their age and a reasonable ($1,000?) down payment.

Then, simply add the land value and the MH value together, and that is what is fair.

So at $550,000, they are way high in their asking price, - unless that is an awfully nice house and shop..!

Hope this helps,

-Jefferson-