All Forum Posts by: Mark Smith

Congrats on getting out there but this is not a great mobile home park deal.  I do invest in mobile home parks and own 2 currently.

The questions you should be asking are:

What is the market lot rent and how does it compare to your deal?  

Age and condition of the homes?  Old homes are a maintenance nightmare.

Who has title of the homes and are they clean?

Who pays utilities?

What kind of utilities are in the park?  Private or public

Are any of the utilities master metered?

Is the park legal, does it have a license to operate as a park?  If not, walk away, don't even look back.

Small parks should be purchased at a 10 cap or higher based on LOT RENT only, not home rent, particularly if you want the renters to buy the homes.

Finding financing for this park may be a challenge, it won't meet underwriting for any of the common products most banks offer and you will probably need 30% down and a strong business case as well.

If lot rent in the local market is 300/month at a 10 cap my max offer would be 300x5x12x.6 x10 = 108K.  This assume a 40% expense ratio for private utilities.  You could go as low as 30% expense if it's public utilities paid by the tenants but that is rare.   

We use a software based management (rent manager) It's spendy but works great for our requirements, it includes all kinds of payment options for tenants from ACH, Credit card, online and even paying at the local walmart or krogers.

Prior to that, I would only accept rent as a direct deposit at the local bank checking account we set up.

Cozy sounds like a great option to start with I'd look hard at that option first.

You've been given some great advice.  Some other things to think about.

If your seller is the agent and also the builder, the seller should have equity and room to negotiate, terms or price. How motivated is the seller?

I know the high end trim and appliance level is appealing but when the time comes to fix, it's not cheap to maintain to the same quality.

If you tie up your money in this deal, can you continue moving forward in your real estate investing or are you stuck for five or six years?  If you are stuck, I'd pass.

Fix the steps, remove the "don't use basement" line in the lease, have them sign and hope they pay.  There is nothing in your lease that prevents you from fixing the steps so get it done.  Your lost revenue will be trivial if someone trips and falls on those steps that everyone has so carefully documented as a problem.  Fix the leak in the W/D, the water will make even more damage over time. Since they are yours, once the moratoriums are lifted, remove them.

You need to attempt to heal the relationship with the tenant the best you can and hope they pay.  The current moratoriums may last another six months or more.  Factor in the backlog once the moratoriums are lifted and the time it will take to process through the courts, you may be 8 to 12 months away from a legal solution.  Can you live that long?

I think a big part of your question is location dependent.  Most of the laws you are referencing are state and local laws vs federal.  

My assessment is the new administration's proposed policies will cause the economy to slow.  Why I think this will trigger the "Politics ruins everything" modifier so I'll leave it at that.

 If my assessment is correct and things do slow, how this plays out in your local market will depend on what the backbone of jobs are in that location.  If the local economy is dependent on 1 big manufacturer or industry, it may be a game changer for that location but if the local economy you are investing in has a good mix of solid industries that will either grow or remain well funded through (think government, public education, military) during the slow down, then you may be ok.  

I suspect property values will not go up or may pull back in some areas, slow means less demand with less demand property values stagnate or pull back.  We will flip from a sellers to a buyers market. 

I suspect financing will get harder and more expensive.  This combined with the buyers market will mean sellers will be more open to creative deals and owner financing.

I suspect rent rates will stagnate near the mid to top of the market but due to demand, low income rates will continue to go up.

I suspect demand for low income rental units will skyrocket as the economy slows or stalls.

For me, this plays into my low income model because all of this will create higher demand for low income housing and allow me to bargain shop for value add mobile home parks to buy cheap and with cheap owner financing.

But, I'm not an economist and this is just my 2 cents.

Tricia, I'm late to this thread but I've had real good experiences with Holbrooks mobile home services in Roanoke, IN.