All Forum Posts by: JC K.

Not an expert, but assuming you have 2 Park Owned Homes (POH) and 10 Park Owned Homes (TOH) and picking the low range on rents you'd end up somewhere between $160K and $180K using some of the standard rules of thumb.  This ignores upgrade/redevelopment costs you are considering.  By the time you do a return on cash analysis you may be unwilling to offer that much.

I suspect the seller will think you are WAY TOO LOW in either case.  So this is where you really want to start brainstorming for win-win ideas.  If you haven't researched the "Master Lease Option" (lease to own) you may want to do that now.  There are many reasons why this may be a good solution for both of you.  

For you, this allows you to keep your cash to invest into the park and start increasing NOI. The park's valuation will increase about $10K for each $1K of NOI increase and you get to keep that when you close.

For the seller, this allows him to realize a better sale price for the property than he would get at current valuations and he gets rid of the headache immediately.

The theory is that you would re-finance the park in a few years and would be able to pay the seller a higher price than valuation shows and at closing you would own a park that is worth a lot more than what you paid for.  You may even be able to get your cash out of the deal.

If you decide to go in this direction, you may want to easy into it. First you have to let the Seller realize the low NOI will drive a low park valuation. At some point you'll have to convince the seller that he is taking little to no risk because you are trustworthy, you are capable, you have a plan, etc. In the event you fail to make payments, then the seller ends up with a slightly improved property. Thus, in theory this arrangement presents very little risk for the seller, provided the contract is drafted properly.

Got it!  I personally don't have experience with a PM or agency to does that work, but I know MHP management agencies exist.  The problem you may encounter is this will eat into your profits given the small scale.

I know what mean about the challenge of going after a "turnaround project" that is remote...  Let me share a few thoughts:

1) Find a MHP that more or less fits your criteria and tackle it as if you are going to buy it, even if you know this is not the park for you.  Use this particular park to develop a plan of attack.  Put together a comprehensive business plan.  Then, when you find the right park you'll be that much more ready.

2) Develop a plan for each "turnaround project".  For example, if you know you need to add mobile homes consider this:

1. Create a list of MH movers, potential sellers, contractors, etc.  Call all of these people and start networking.  Ask the mover if he has or knows of MHs in the area that are for sale.  Often, these movers buy MHs and fix them.  They could be a one stop shop for you.  
2. Call nearby MH Parks.  Pick their brains.  Ask for names of contractors that fix up MHs.  Talk to the contractors and see how they can help.
3. Talk to the current MHP manager.  Even if they have a full time job they may be willing/interested in going the extra mile if you offer a fee for each mobile home they find/fix/get ready/rent, etc.  Or they may be able to suggest someone that would do that.
4. Look for MH investors in the area.  This would be awesome if you could make happen.

3) Consider partnering with another MHP investor in that market.  Any potential investor will want to see your business plan though.  So have one ready.  Preparing one is where the fun is.  

Hopefully others can share their thoughts on MHP management agencies.

Congrats on removing geographical barriers. 

Can you elaborate on the turnaround projects you are considering?  Complex projects will likely require a different approach.  

How big of a park are you considering. MHP management companies probably make more sense at large scales. 

Please share your thoughts on the pros/cons of senior MHPs?  I've come across a few MHPs that in my opinion did not offer any special amenities to cater to seniors.   

Why would a park owner want a senior only MHP?  Are senior MHPs better kept?  Is there less turnover?  Are rents higher/lower? Can an investor easily change a senior MHP to an all age park or vice versa?

It may help if you shared what its about this particular property that grabbed your attention to begin with.  I realize there are all sorts of investment types and goals out there, but the beauty of multi-family investments is in the economies of scale.  If you could obtain this property with no cash down and it was close to home and easy to manage, or if this was a land appreciation deal, then maybe there is something there even with the small number of MHs.

I would personally not include RV rent and shop building rent in my buy analysis.

As for the "cash buyer" question; With $200K ready to invest, I would be looking to buy a 40+ unit MHP, with 20% down and/or some form of seller financing rather than using cash on a 3 unit property.

I like the upside given the high vacancy rate. However, you need to make sure demand is there. Call nearby MHPs and ask them about lot rents, vacancies, etc.  you may even find a better deal in doing so. 

look in Craigslist for rent ads. 

Some of the demographics you shared don't look good to me, but you need to convince yourself.   

I would dig more into "four homes being repaired."  It wouldn't surprise me at all if these have been vacant (not repaired) for a long time. 

Offering $100K under asking price is not a problem in my book. 

Biggest question mark in my head is why hasn't this sold in 3 years.  Talk to the manager. 

Look at older aerial images in google earth to see if the park had more MHs in recent years. 

If you intend to add MHs, you need to make sure you have funds to make that happen.  

Consider drafting a letter of intent even if you never send it. Taking this step will push you to really get going. 

Best of luck!

Thanks for the input. Yes, in my mind, everything is up for re-negotiation at this point.  I'll try to remember to update this post with relevant info after we make some progress. 

Did this on the fly using my phone;

Assume price of $450K, 25% down, 6% interest, 20 year loan. I came up with return on cash of 8.8%. Not good enough to get me excited. 

If you can generate another $10K of NOI by raising rents that much, then you would double the return on cash.

Raising rents alone doesn't excite me enough though. I would want more upside potential. 

So a combination of a lower sale price, better loan terms, adding MHs, and raising rents may provide for a nice investment.  

@Mark Gruetzmacher, I'd still run a cash on cash analysis. I be happy to run one for you when I get to my computer. I'd assume a 75% LTV.

I have one MHP under contract. I've analyzed several of them and all my analysis led me to looking at things from a return on cash point of view. If the cap on rate is 8%, but return on cash is over 20% in 3 months, then I don't care about the low cap rate. This assumes, there is upside somewhere and that I can raise cap rates to an acceptable level in little time. 

A low cap rate can be used as the basis for negotiatin strategy though. You can explain to the Seller that the bank will require an appraisal and appraisers will typically require cap rates of 9% or better, depending on location and other factors. 

I think the biggest hurdle would be related to permitting and zoning. You may want to start by contacting your county.  

I've never ran the numbers, but my gut tells me even if you had free land  it would still be more economical to buy an existing park. 

For whatever is worth, below is a link to an article that touches on the subject of building MHPs. 

https://www.mobilehomeuniversity.com/articles/why-...