All Forum Posts by: Frank Rolfe

When someone dies in a home, the first step (as discussed here at length) is to know the laws of your state with great specificity. All of the answers on here are pretty accurate, but I wanted you to know about one special rule that you don't want to fun afoul of in your state, if it's a part of your state's law.

In some states, even the dead person has no known heirs to claim their personal property, you are still required to box up and store anything that is "irreplaceable" such as photo albums, trophies, etc. until such time as a family member may claim them. This statute typically has an end time of around 6 months or so. So once you obtain possession of the home through abandoned property action, you can't just throw everything into the dumpster. Instead, you have to sort through every item and decide whether it's household in nature (cleaners, clothes, etc.) or of "family importance" such as photos, certificates, etc. You then box those items up and store them in a secured storage locker for a set amount of time to see if anyone comes forward to claim them.

That being said, you can get pretty aggressive about it to save yourself the cost of the storage. I once had a resident die and nobody came forward to claim their estate. Then another resident told me that they had a sister who lived in town but hated them. I called the sister and they told me that they hated the deceased individual and wanted nothing to do with them, so I boxed up all the important items and had them delivered directly to her so she could decide what to save and what to discard (even all of it if that's what she wanted) so that I didn't have to pay the $100 per month storage fee.

The bottom line is that we live in a very litigious society where everyone is always looking for a lawsuit and you need to know all the special requirements in the very real scenario of a resident dying. Your state mobile home association (MHA) will have a lot of information on this, as will a Google search. 

Before you do anything you need to:

1) talk to the city zoning department and see what uses are allowed on the property.

2) check out the survey to see if there are any portions that are not usable due to setbacks, easements, etc. in addition to what the maximum buildable area is based on the zoning restrictions.

3) see what utilities you have available at the tract (water, sewer, gas, electric).

4) based on the above, see what the options are and if you think any of those would be profitable.

5) decide if you want to build and operate whatever that business is or just sell the land to someone else to build.

Your post is missing the key information:

1) What is the monthly lot rent (either in the park or in surrounding parks)?

2) What is the age of the park-owned homes?

3) What is the metro market size as defined by Bestplaces?

4) What is the SF and 3 BR apartment rent in that metro as defined by Bestplaces?

5) What is the average rent on the storage units per month?

You need to talk to your state's manufactured housing association (MHA). This is a legal question and the last thing you want to do is break the law and get sued because your contractor wants to make money installing meters for you!

Most state utility billing questions are black and white -- there's no personal interpretation needed. Get the facts before you do anything.

We own around 20,000 lots and still only get in about 100 "organic" move-ins per year (that's a rate of around .5%) -- and even then it's mostly in just a hand full of really hot markets like near Austin. 

To fill lots in most parks you have several options based on your capital and the level of demand (and the credit quality of customers). Here's the list from cheapest to most expensive:

1) Market to RVs and have them fill lots. Costs zero. Problem is that they are not counted as quite as valuable by lenders or future buyers because they can also move out at the drop of a hat.

2) Have a dealer bring in homes and sell them in position inside your park (free to you).

3) Have a Lonnie dealer bring in homes and sell or rent them in your park (free to you).

4) Bring in organic homes (you're already doing this, but it costs around $5,000 because you have to pay for the move).

5) Bring in used homes, renovate them and sell them in your park (cost could be $15,000 to $25,000).

6) Bring in new homes and sell them in your park (this could be zero with 21st Mortgage's CASH program but without that program around $30,000 to $40,000).

You're best bet is to try all of these and see what works. Once you get one out the door, bring in another. Over time the most natural fit will fill the park.

Mobile homes are no different than regular homes regarding the necessity of offering an appealing product. I would definitely paint it (low cost/high impact) and make it smell good (remove old smells and add an air freshener). Beyond that the standard playbook is to replace the old carpet with vinyl that looks like hardwood, and then add area rugs that you can buy from Walmart or Home Depot (if the current flooring can't be saved). We have also found it extremely important that the stairs/deck be solid with a decent railing and that the door opens easily -- otherwise it gives a terrible first impression. 

Most mobile homes are an affordable housing product. That means that the price is the most important feature, and the customer is tolerant of many aesthetic issues in the name of getting something they can afford. But simple items like paint and carpentry and air fresheners can make it much more appealing and cost very little. I would start there.

You may still be able to get a small-town bank loan on a deal with 50% occupancy -- but you'll have to have a good narrative on why there's so much vacancy and how you're going to fix it. You'll also have to have a price that is extremely attractive so the bank is not as exposed if you fail in your mission.

We've obtained financing from small-town banks on deal just like this, and here are the steps:

1) Do a Google search of every bank in the metro area.

2) Eliminate any that are national or regional banks. Look for ones that have just one or a few branches.

3) Build a really great loan request with ample documentation of your plan and how to mitigate the risk.

4) Build a really good narrative on your experience in real estate or business that would allow you to pull it off.

5) Contact each and every bank in the market.

6) Get every single one that is willing to consider the loan.

7) Keep pushing it until you have at least one interested group and then try to wrap it up.

Deals like this are never easy to find financing for. But it does exist if you look around hard enough. We've never had to pass on a deal due to lack of financing.

Anything that is "real" property counts (lot rent, apartment rent, stick-built, commercial building, etc.). Anything that is "personal property" does not (mobile homes).

Not all ancillary structures should be sold in a mobile home park. The only ones that you should consider doing so are ones on the frontage that have the ability to have separate utility connections and access. To sell them off you have to subdivide the parcel, and you also need a release from the lender which allows it to be removed from the collateral pool. By far the majority of ancillary structures are maintained in the mobile home park, and their rent is used as real property value, the same as lot rents.

In many cases you would sell off ancillary structures to make the property more attractive to a future buyer or lender. For example, if you have a self-storage facility along the frontage that is in poor condition and half full, you might be able to find somebody that is excited about storage who would buy it, renovate it, and more professionally manage it. You also benefit in that transaction since you are now a pure mobile home park and not a hybrid storage/mobile home park.

And don't forget that you sometimes would subdivide and allow the seller to keep that ancillary structure if they feel it to be hugely valuable and you don't. The perfect example of that would be if there's a bunch of raw land that comes with the deal that you feel is worth $1,000 an acre and the seller believes is worth $10,000 per acre.

7 x $275 x 12 x .5 = NOI $11,550. The value of this deal is around $115,500 plus the value of the mobile homes as personal property. You are evaluating this as though the mobile homes are real property, which they're not. This is not an apartment complex -- this is a parking lot for mobile homes.

The only way 7 lots would be worth $550,000 is if it was in Orange County, CA (I know of someone there that has 10 lots valued at $1 million, but the lot rent is $1,200 per month so it makes sense) or a similar area.