All Forum Posts by: Jim Johnson

Paul,

Clayton homes has a CASH program for park owners. It is a great program and they will carry the cost of the home into your park, and then finance the end user or finance you if you choose to rent it. Price point is under 20k for a singlewide. Also- no options. Comes as it comes. We also have pulled Legacy Homes into our parks. Again, a low price point but they do not finance to your tenant, just too you. But the terms are very fair. Both programs are administrated out of Texas, but they manufacture in other states as well.  

We always put our managers on payroll. Not a 1099. This covers us and them in the case of a workers comp claim. They get a paycheck every month, or in some cases every 2 weeks, and we pay taxes etc... 

As for managing parks- it varies by state. You might find a good partner that manages parks well, and give him / her a ownership % in addition to paying them to manage. I have found most people manage their own properties much better than other peoples properties. In fact- there are some property management companies I track to see when the parks they manage go up for sale, they are so poorly managed I know there is huge upside in buying them and just managing them correctly. 

and no- I will not share the names of said mobile home park management companies. 

I want to point out getting the park under contract, and getting the right price and terms do not all have to happen in the front end of the contract. You might set the tone by asking for terms in original offer, and then after you have all the data from your due diligence, you work to the proper price and terms. If you do it on the front end, you will probably end up doing it again after the due diligence period. I like to have that talk after I have seen the numbers and visited the property with the seller and agent on the phone. We all break out yellow pads and work through the numbers. This is really more of a education process, bringing both the seller and agent up to speed on how the property should be priced based on real numbers, real expenses and the extra junk the appraisers toss in that nips away at the gross income. In the cases where the property is not listed, or not priced, we do the numbers walk on the front end and put it under contract. Then we adjust after the DD period. 

There are several finance options in Texas, I have a park I am buying from someone in this same way in Texas. Though, it is really more a typical loan. Be aware of interest rates too low, and pre-payment clauses. Also, what happens to the note if the seller dies? Does it go to a trust etc? Who tracks the note? If it is contract for deed, what happens if he has an IRS issue and the property is taken, or if he dies and it get locked in court... I would use a performance deed of trust, and have several clauses that would trip the deed and convert the balance to a loan. Hauling out homes is 1500 - 3000 per for a single wide... in texas, give then to a group of deer hunters to use as a camp... 

be very careful using 'rent to own'. This could be a 'loan' by IRS rules, and you might need to count part of your payments as interest. 

you need to base the value on the prevailing space rent ( adjusted for utilities being paid or metered). Do you have that number?

I am local to Denver, I used to present at the bootcamps Dave and Frank (now Frank only) put on. Dm me if you want to get together for lunch. I own 5 parks, 4 states... 

@Brad Griffithundefined

Well I can weight in a couple of ways. I own property pretty close to Gary Indiana and I have looked at parks there. I have even looked at parks that are mostly full, and cash flow well- bottom line- you could not give me a park there. All of the economic data screams no. All of it- there i not one rising element to grab. 

As for operating parks out of your area- that i all I do. I know Jefferson Lily and and I am sure he also operates all of his MHP holdings away from where he lives. If you buy a park that is pretty easy- not many vacancy's and public utilities-  stick to tenant owned homes- they are pretty easy to operate from afar. Well- pretty easy for me. 

The bootcamps and educational materials help- I think the if you really want to short circuit the process find someone you can partner with and let them operate the park. You watch and learn. Ask to meet at the property for onsite visits and ask all communication be transparent, for instance I do not use email but only a forum. Now you can watch, learn and really figure out if you want to own and operate, or just be an owner. Both have a great return. You can also find someone set up to mentor you. 

FYI- I set up my partnership and operational agreements so I an be bought out. That way if after a year, the silent partner wants to take the reins and fly the ship- they can knock me out of the left seat. The price is not set, but the process is. 

Financing MHP's. Smaller parks are financed by smaller, local banks. In this case it might be tough depending on the cash flow and cap rate. I always add in a page that shows my track record in operations and ownership of MHP's. That might be another reason to partner with someone, you get their 'wake'. So I do not have issues with financing, but if you were really green, and taking on something that was not turn key, a bank might think twice. 

When you value this park you need to separate out the pad rents from the home rents. You can use the rental homes income, just the pad rent portion. Then you need to separate out the expenses. CAP the space rent and then hope the other income covers the rental expenses AND the rental homes capital improvements. It might, it might not cover. The value of the homes can be found through your insurance broker or via any replacement method. First- using the size of the home and lot- can they be replaced? If the lot only fits 12 wide homes, or homes that are very short, you might not be able to replace them.

quick and dirty-

pad rents monthly x 12 x .65 = NET

I would value the real home rental income x 18 to 36 depending on the turnover.

true value of the homes- blow away value.

Add it all up- see what ya got. 

So how you value RV is not the same as Pad Rent. The RV's can, and do move and the labor to fill the lots, collect daily funds etc drives your RV management costs way up. To know the value you would need some historical data, and some very good management cost numbers. You will still apply a CAP to the RV numbers, but remember you CAP the net, so you need strong and accurate income and expense numbers to go from. In a small park your RV expense numbers can eat through a LOT of the daily rent.