All Forum Posts by: JC K.

@Rod Owens makes a good point.  I was thinking you'd spend at least $15K per lot to develop.  I know of a property that spent nearly that amount just for permits/lot, so Rod's $20K isn't crazy in my book.  That's $400K and then you still need to buy MHs.  The cash on cash return just isn't there.

Building a storage facility may be a better way to go from a financing point of view.  I guess I am assuming you can get financing for that, but not for developing a lot without homes in it. 

Hi, welcome to the subject of mobile home parks. 

I have never priced development costs, but from what I have seen I am pretty sure you can buy an existing functioning park with less cash than you would need to develop a new park.  

Here is a link on why it may not be such a good idea to develop a new park. 

https://www.mobilehomeuniversity.com/articles/why-you-dont-want-to-build-a-mobile-home-park.php

If there aren't environmental issues, flood plain issues, etc you've found a unicorn!

Deals this good only exist in the institutional league. If you don't have it under contract by now it may already be too late. 

@Cory H. This is one of those things that most MHP investors will probably be faced with at some point or another.  You may want to look into is 21st Mortgage's Used Home program.  My understanding is that thru this program you can get cash for MHs that are 1976 or newer.  If you think about it, this can open the doors to different opportunities as in theory you can recover some of your initial investment.  The way I read it, the max sale price is 130% of NADA.  The tenant (under a lease to own program) pays 5% down.  Interest rates are 7.25% to 10.95%.  Other terms seem very reasonable.  

I will definitely be looking into this to sell a few POHs.    

More info is needed. To me, this deal doesn't pencil out on lot rent only.  Why don't you share your valuation analysts and we can weigh in?

How do investors (investment groups) that own several parks structure their business? I gather it makes sense to have one LLC for each MHP. Do these investors operate the various LLCs under an "umbrella" LLC or some other entity?

Anything else about the business structure worth pointing out when owning several parks?

@Steve Witt you may have an opportunity here given your particular situation. If you assume your expenses would be about 50% of gross rents you could end up with a 12% CAP at the asking price. Smaller parks have higher expense ratios.

With 6 more homes you would probably more than double NOI and the park's valuation. You can add homes at your leisure. I use $15K per home when adding homes in my analysis. This assumes I buy cheap homes nearby that need some work. This would require another $90K on top of your initial investment.

The other reason this may be a good fit for you is you are looking for a retirement project.  It sounds like you would be managing things, bringing homes, improving the park, etc.  If this is the case, then how many other parks are you can more than double occupancy, that are presumably close to your residence, that require such small down payment, etc?

Do an exceptional job on due diligence.  Make sure you can really get tenants.  Small and poorly managed parks have expense ratios higher than 50%.  I am looking at one with an expense ratio of 65%!  You also need to make sure there won't be issues with bringing homes to the park, lot sizes, etc.  Make sure you understand everything you need to know about treatment plants.  This is probably one of your biggest risks.

I also like to outline the top 3 to 5 reasons why I should NOT buy a given park.  I try to do as honest of an assessment as I can.  Then a few days later I try to find solutions to each one of those reasons.  What you'll find is that by going thru this process you'll be better prepared to assess and often quantify risks.

Keep us posted!

Very helpful, thanks!

Do you find there is a difference in tenant turnover between the two types of parks?

I wonder why this other person hasn't bought the park already. 

@Robert Fletcher a bank's appraiser most likely would use a 8 to 10% market cap In their valuation.  Because the seller understands the potential he will have difficulty accepting such valuation.  This is why you need to find a win-win. 

The sewer treatment plant will scare away most other investors, but if you have experience with this, you are comfortable with your understanfing on county requirements, etc. you may be the best buyer the seller will see in a long time.