All Forum Posts by: Swat Khan

Wow, lots of interest. I would've joined all of you BP'ers but I am out of town. I hope you guys have fun. I will look out for the next one.

Swat

Tim, You will need 2 documents. 1. Lease agreement (terms, explains who is responsible for what, how much down, how much paid to seller per month) 2. Option to purchase (you set the date with a price) Bill Gulley nailed it. It's counterintuitive to fit the strategy to a deal. It's the other way around. You gather the needs and problems to be solved, then find the solution. You are the doctor, you don't prescribe the strategy until you find illness. One of those strategies is a lease option. In my experience it's usually a property that can't sell due to location, lower occupancy, death/divorce/debt/distress/taxes and the seller wants the buyer to do the work. Buyer would invest his own $$$ in the property to bring up occupancy. What I find effective to get the "meeting of the minds" is writing out a plan (keep it simple) on how you plan to stabilize the property. Like 5-10 steps. Then present this with your offer. It shows you did your research. Must management company if you're not doing it yourself. This property is high occupancy, so you would have to ask good questions to the seller on what are his needs and motivation. Why is he selling? Does he have debt on it? Getting the seller to carry a note should also be considered. Good luck. Swat

@Jim Johnson:
Yes- expenses on smaller parks- even with the tenants paying all of the utilities are higher- probably 40% IF it is a space rent only park.

Jim, yes if we run it at 40% expenses, it will put me in the red due to the high $2995 payments until we increase the rents to $260.

Comparable space rent in the market is $280. This is where I would like to bring the rents to. I ran a test ad for mobile homes for rent-to-own @ $500 per month (around the cost of a 1 bd for a apartment in the area) and I got around 20-30 calls per week. The overall region is very high occupancy.

There will only be space rent. I won't own any of the homes.

Thanks @Leslie A.

@Jim Johnson

Jim, thank you for the feedback. Are you suggesting we factor in 40-50% in expenses when tenants pay all utilities and no park owned homes? I was factoring in 30%.

Jim, other park is the same except for paved roads. No pool.

Market rents:

1 bd: $525-600

2 bd: $650

3bd: $750

What do you mean give away 7% in bad debt? Do you mean vacancy factor like if a tenant doesn't pay on time, or is late? Thx.

@Mark Bookhagen

Mark, would prefer to do it all in one increment though. We may have to do it in (2) $50 increments over 12-24 months.

@Leslie A.

Leslie, you are right, if the owner paid, it would put us in the red. the tenants pay all utilities.

It's a mom and pop shop, where most of the expenses are handwritten.

Based on the numbers, since tenants pay all utlities and all of the homes are tenant owned, the expenses are low. The only expenses he has are taxes $1200, insurance $600, and 2 loads of gravel every year $600. He said he calls out the roto rooter for park sewage. He is responsible for the pipes between the main and each housing unit.

Like you, I factored in 30% on expenses, and it's a -$2700 break even park. The main concern is the debt service.

Leslie, yes good idea. He hasn't budged on the payment but that was early on in the process. Since then we went back and forth on the contract for other terms. In a nutshell, he wants $2995/mo with $50K down. Other terms are somewhat negotiable. Based on yours and @Wendell De Guzman comments, I will work on this. Maybe $2000 mo for first 8 months since he's getting $50,000 up front.

@Joe Gore

Joe, no rent control my friend. :thumbsup:

@Wendell De Guzman

Wendell, I appreciate the analysis.

Agreed. I will see if he can do $2000/mo for first 8 months until we raise rents to build a cushion.

24 of 25 are occupied.

If this was in a bad area of town with bad schools, I wouldn't be very confident. However this area is very good, with 9/10 high school ratings. Also has a desirable private school.

I asked him and he said he didn't want to scare the tenants. He is currently raising rents at $10-15 per year.

Would love BP MHP Pro feedback. After analyzing over 100 deals I found this one. 1. Do you believe this is a deal? 2. Is there anything I should look out for? 3. Should I add anything? 4. Are the terms OK? Until I increase lot rent in January 2014, I have $900 per month for expenses to work with. Story: I am purchasing a 24 spc park in a small family oriented town. I met with seller and he's sharp and has owned 7 parks. Looking to retire. Deal: 24 occupied spaces Asking: $365,000 Seller accepted $275,000 - $50,000 down, $2995 per month - CAP rate actual: 12.1% - CAP rate: 19.4% (12 months pro forma at $100 increase in space rent, $265/spc, 30% expense) - Terms: $225,000 Seller carry note 12 yr $2995 per month, 7 year 18% pre-pay penalty - Space rent: $165 - Market rent: $280 - Gross rent/month: $3960 - All tenant owned homes - Road: park, gravel - Water: city - Trash: city - Sewer: city Market Research: - Schools: A (great high schools and private schools) - Population: 5000 - Metro area population (1 hr) from 6MM metro - Test craigslist ad pulls 20-30 calls per week.

Welcome to the forums Travis Hintzel I'm here in DFW as well for a month working with our team on an acquisition. As I'm sure you already know, it is quite an active market and market rents are steadily increasing as people relocate here. Focus on niche areas as the common areas are investor competitive. You will do great.

This is what we target to generate leads: 1. call brokers and wholesalers every week and ask them if they have any leads. Get them talking and you will pickup a few pocket leads. 2. target out of state absentee owners with equity. 3. focusing on C neighborhoods may increase your response rate 4. Focus on areas not frequented by investors. Drive a little of town.

We had a hotel in that area, based on our market analysis it is strong with positive long-term outlook due to the demand for housing. There is exploration in this area with plans for additional drilling. If you find any apartment buildings in this area let me know. Your fees would be protected.