All Forum Posts by: Matt P.

Been an owner operator for 25+ years. Let me cure you of one of the primary mistakes folks who get into the MHP business make; Renting out the mobile homes (I know you said rent to own, I'll address that later). On it's face, your looking at "double the income" so to speak, and that increases the CAP rate which will increase the value of your park. This is in direct violation of the philosophy of owning and operating MHP's which is "owning the dirt, and you can't hurt the dirt". MHP's have lower operating costs because you do not have to deal with the problems of a rental unit. Your just renting dirt. And when it comes time to sell or refinance your MHP, banks and buyers, including myself will look at any and all park owned homes as a huge negative and will discount the value of your park because of it.

Now, with the above being said, you've got to fill vacant spaces. First stop is your local dealer whom you offer him the opportunity to park one of his models on the property and pay you rent. You'd be surprised at how many of these dealers will do that. 

Or, you buy a home, put it on the lot and then SELL, not rent to someone. But what if most folks don't have the $10 to $20k to pay cash for a home? Then you sell it to them on a note, and the note is in the name of another LLC you start. You buy a cheap mobile home for let's say $6K, put $1500 into fixing it up and sell it to someone on an owner carry note for $18,000 with $1500 down and 10% interest over 8-10 years. You then sell that note to a note buyer at a discount and collect maybe $12,000 at closing and now the note is no longer yours to manage, and you put $6k profit in your pocket and if the buyer quits paying not your problem as the note buyer is now on the hook for your space rent.

Never have any park owned homes. Ever. 

Hope this helps!

Best place to find financing for a park is the bank that is already financing it. They know the property and are comfortable with it.

That's how I've financed nearly every park I've purchased...

Easiest place to find financing for a park is the bank that is already financing it. I've done that for nearly every park I've bought over the years.

Wholesale commercial residential? SFH are valued based on the "market".... this is the price a buyer is "willing" to pay. There are very limited metrics in controlling SFH prices as again, they are priced according to what is generally an emotional transaction. Income producing real estate is valued based on CAP rates, or capitalization rates. Simply put, how much money does the property make determines largely how much it will sell for. Wholesaling income producing properties at CAP rates above market value (which means greater returns for the investor compared to the local market) means you are going to need sellers that are willing to sell their properties for less than other comparable income producing properties. If and when those types of deal come on the market they usually never even make it to market as they are snatched up instantly due to being under priced.

Not trying to blow a hole in your boat, but its a completely different market.

How long do you keep those units as rentals? Are they part of an exit strategy or just a short term cash flow play? Also, how are you selling the homes in the parks?... cash / buyer financing or are you carrying paper?

Hi Larry. I'm an owner operator with parks in multiple cities. You indicate that as a lender you prefer parks that are 1/4 rental units? Do you mean the homes are owned by the park and rented out by the park?

I've never, in my 20+ years of owning parks, heard of a lender having a preference for park owned homes. This is the anthesis of owning a mobile home park. When I look at buying a park I always heavily discount if not outright ignore the valuation and cash flow of the rental units when determining my offer. Every park owner and lender I know has the same policy. Rental units create overhead that detracts from the value and really the reasons for owning a mobile home park.

Can you elucidate your companies thought process of why they like to see rental units in a community?

I'm surprised no one has mentioned the NADA Mh Value guides. They're basically the Kelly Blue Book of Mobile Home valuations. http://www.nadaguides.com/Manufactured-Homes

I own multiple parks and have been in the business for 20+ years. 

1) Unless you control (own) the dirt, you are putting your financial security in the hands of the owner of the park. You have no control. 

2) Any owner of any park that allows subletting (other people own the homes and rent them out to other people) is putting themselves in a precarious position. What happens if you let someone buy up 20-30 +% of the homes in your park and one day they come to you and say "lower your lot rent for the homes I own or else I'm moving them out". Trust me it's happened. Check the park leases for subletting clauses.

3) Your considering purchasing depreciating assets with a fixed debt component. If the park owner has 3 vacancies he's losing out on lot rent. But he doesn't have to PAY that lot rent out. You, on the other hand, DO have to pay if you own the homes on his land. It hurts more for you to have a vacant home on someone else's space.

What's the solution? OWN THE PARK. OWN THE DIRT. 

Mobile home parks are just land banking. Don't stray from that mantra.

Hi Joseph,

I just recently completed another purchase, this time a 230 space park in the NE and have been in this business as an owner for 20 + years. Hopefully I can elucidate some things for you.

Please excuse the tone of my advise if it comes off a bit harsh..I mean you no ill will, rather, I want to help manage your expectations.

Having a history as a credit analyst I think you'll get what I am about to lay out pretty clearly.

1) From a lenders perspective you have "no" experience managing anything close to this size of an operation. In Monopoly we jump from 4 green houses to one red hotel. Not so much in the real world. If you we're looking at a 20 space park that would be seen as less of a "risk".

2) Skin in the game. Given the numbers (200 pads at $410 ish a month at 100% occupancy) the park grosses $984K annually. Lets say 30% expenses so $688K NOI. A $4.9mm price is a pretty good price. Unless there's missing info (there usually is). That being said, lets say the park appraises for $5mm. Any lender will want 30% down, especially if you are new to the game. That's $1.5mm. You will also need to show reserves. For the park I just purchased the lender required me to have $500K reserves and that's after putting $2.1mm down to buy it.

Yes, you are in over your head with THIS particular park.

If you can find an EXPERIENCED equity partner that can show a history of successful park operations of similar sizes and use that relationship to build your experience portfolio that would be the best scenario if your heart is set on this park. You have a valuable skill set as an accountant. This always translates well into becoming an investor as managing the numbers is always an important component. 

*Personally I'm never so hot on 100% occupied parks unless the rents are grossly under market and even then you're sometimes limited statutorily on how much you can raise them. Always look for the upside.

Good luck!

Been in the business for years. Own multiple parks. Happy to offer suggestions etc. 

One thing I preach over and over; DO NOT rent out the homes. This is the anthesis of the park business. Thinking you will improve the NOI and the CAP rate of a park by renting out the homes will lead you into a DEAD END with investors and lenders as we/they heavily discount or outright ignore that source of income when valuing the properties.