All Forum Posts by: JC K.

Why build a MHP when you can buy one cheaper?  

I don't know about an RV Park though.  

Something isn't right.  If rents are $900 per month, then that's probably not just lot rent.  If the park pays for water, then expenses look too low.  If the seller is saying expenses are only 15% of gross income, then $900 better be lot rent only.  If someone is getting $900 per month in lot rent, then this is a very unique situation and recreating it for $500K seems very unlikely.  

Residents bring rent to the onsite manager. Manager logs info in rent roll form and deposits checks. I would like to start using Cozy, but some residents are old fashion. I provide free WiFi only at our laundromat and RV area, which gives the manager service too. 

I use Cozy for applications and extra advertising. I currently do the majority of the advertising, but that will change once I figure out the best methods. FB local groups has been an excellent medium. 

I am selling homes so I talk to potential buyers. The on-site manager shows homes. She gets paperwork signed. 

Most of my communication with the manager is via text.  She is young and had no experience, but I had few choices and she is doing okay and getting better all the time.  Part of my vision is to mentor her and help her make money from owning assets. 

I completely understand.  Renting out the lots is what most folks in these forums are after, including me.  It isn't as easy to find that perfect park, with lot rent only tough.  So many of us end up selling those homes.  When you sell homes rather than rent homes, you most likely end up improving the quality of the tenants and the overall quality of the park.  

My short lived experience has been to require a down payment of $1,200, mostly to screen out those who really can't afford it.  I also do some math to ensure buyers don't exceed 28% of their gross income on housing.  In my particular market I try to keep total payment (lot and home) to about $615 to $700 per month, with a contract length of 5 to 6 years.  These amounts are slightly less than renting an apartment.  My hope is that by being selective with those who buy I will have longer term and better quality residents.  So it does take a bit of work upfront, but hopefully not as much down the road.

Best of luck!

@Travis C. did you end up coming to terms on this?  From the park info you provided and the owner's last price, it seems the issue holding you back was financing terms.  I can comment on a couple of things.

Small town mobile home parks are not for everyone.  I can see how affordable housing in small towns can be in high demand, especially if that is the only MHP in town.  I've come across a similar situation.  On thing I ended up doing is I bought a home and had it delivered to the park during the DD period.  I was able to sell the home (financed) and confirm my prior assesment that there was sufficient demand.

On the financing side of things, it looks like the owner is somewhat motivated so there may be some room to do something creative.  You may want to check with other local banks.  In the situation above, one of the banks I was dealing with wanted 30% down.  The owner was willing to carry a note for 15%.  I managed to talk the bank into accepting the owner's note as part of the down payment.  Thus I only put 15% down.  

My experience is fairly limited to one location, but based on that 15 year is the max. 

If the property doesn't pencil out at 15 years, then perhaps you'll find a better opportunity elsewhere.

I've gone the owner financed route.  I enlisted the help of an attorney.  Looking back, I am glad I got legal help.  This stuff requires some expertise.

I would keep it simple and focus on your actual NOI. The Lot rent only valuation is for the boot camp types looking for a great deal. Chances are you'll find a buyer at a reasonable cap rate from your actual NOI. As such, I wouldn't worry about the Lot rent / house rent split. Simply, charge what the market allows.

When selling homes, I would encourage you to consider seller financing rather than lease options. 

Finally, make sure you have fully analyzed your return on cash and total investment needed to fill lots with double wides.  If you are getting $600 in payments, you only net $3,600 per year at a 50% expense ratio.  In this case, a $36K double wide will yield a 10% return on cash. An $18K single wide would double the return on cash.  This assumes there isn't much of a rent difference between these. 

The valuations given above are just rough quick evaluations in my opinion.  The next step would be to understand the real expenses and utilize those in the evaluation. At this point,I would also consider income from POH. If nothing else, this would help in understanding how the seller sees the valuation.  

Regarding small Lot sizes, I don't think you really have what I consider small lots. As long as you can bring homes into those lots without issue I'd say you are ok. 

@Ken Rishel I really like that idea!  On the other hand, I am already giving Cozy a try.  I can certainly make either approach part of the screening criteria.