All Forum Posts by: Celeste Fackrell

Edward,

I live this every day.  I currently own a small park (8 pads, 4 POHs) about 3 1/2 hours away from my house.

When I bought the park, I knew I had to account for management, perhaps more than normal, as I was so far away. 

I searched for awhile but I found a responsible young man (and family) to live in one of my homes and manage the park.  In addition, he also helped remodel some of the homes.  He currently manages, and does all the maintenance required on my 4 POHs.

Currently, he does not have to pay rent on the house, he does however, pay rent on the lot.  During the heavy renovation portion for the 4 POHs, he paid nothing; simply lived there and worked 10-15 hours a week for me.

I held out until I found the right candidate; it took me a couple of months.  I think I was lucky. I'm losing  his income, but I accounted for it, the park makes decent returns, and I don't worry about my park.  Both he and I are grateful for the each other; we each serve our purpose.  

Was I lucky?  Most would say yes.  However, its working for me.

Shannon,

I have been in real estate investing for almost 30 years and bought my first small mobile home park last February.  Although most of the experts say don't buy small, there is not enough money in them to be worth the hastle, I have had a great learning experience over the past 14 months and, although the money is not great, the park is paying for itself, has been a great way to learn, and will continue to yield small rewards for years to come.

I did not go to the Mobile Home University, but many say it is worthwhile.

As Rich said, you need to evaluate on CAP RATE. I would not recommend buying a small park at less than a 12 or 14 Cap rate unless it is very solid and running smoothly already.

To evaluate you park:  (quick evaluation, before actual diligence)

# of lots currently rented (say 10 of the 12) x lot rent/month (say $200/lot/month) = 10 x 200 = $2,000/month gross rents.

Not take out the monthly expenses as Rich noted.  Monthly expenses are at a minimum, insurances (liability at the very least), taxes, business fees, health department fees, road and infrastructure maintenance (hold back for one-time expenses), management, utilities, advertising, etc.  In Rich's example he used a 40% expense ratio which is a good place to start before your actual due diligence.  If the park is on well and septic, then jump the initial expense ratio to 45% or even higher for the quick analyses.  Now lets say all these expenses add up to $800/month.  That means that your NET OPERATING INCOME = $1200/month ($2,000 - $800) or $14, 400/year.

If you want to purchase the park at a 10 CAP, then in essence you should be willing to pay $14,400/.10 = $144,400 for the park. Lets assume the trailer that you would own is worth $5,000 (not hard to find out typically). They you add the estimated worth of the trailer on to the purchase price based on lot rent to get $144,400 + $5,000 = $149,400 for the purchase price of the the park.

This is absolute supposition.  If you want a better evaluation, and you can provide some details, I would be happy to go through it with you.   Details needed:  Average lot rent,  how many lots are currently rented, Expenses; the biggies are insurance, taxes (property), and utilities.  If you don't know these, again we can plug a % in for evaluation purposes.  Year/bed/bath/ size of the trailer being sold in the deal.

It is not the end of the world if you don't have all this information; a preliminary evaluation can still be done.

Hope this helps.

Sam

I would typically:

a. Find the materials you want and identify them by make, model #, color, etc.  You have to do this anyway so this is no extra effort.

   * Get pricing for the materials yourself.  (don't buy them and don't provide your prices to the contractor).  After you have your materials selected, and your internal pricing, THEN get hard pricing from your Contractor(s) on the materials.  Break them out by item:

          8 windows; installed in existing openings:  Anderson series 70, double-hung, double-pane, low-e, with grids.  Contractor responsible for sizing, fit and finish.  Total cost = $__________________

3 interior doors; installed in existing openings:  hollow 6 panel, Home Depot Model.......  Contractor responsible for sizing, fit and finish.  Total Cost = $_____________________.

1 range; LG Model ______________. Contractor responsible for fit and finish.  Total Cost = $____________

b.  For materials where the quantity needs measured and there will be waste, provide the make, model, color, finish, etc. but make the Contractor measure and be responsible for the QUANTITY.

Examples of these types of materials are:

Counter tops, Roofing, flooring, any sheet goods (dry wall, paneling), paint, siding, and framing materials, deck lumber.   

You need to price these things (Just like you would if you were to buy them yourself) but let the contractor tell you how much they cost.  

Typical bid item would be:

Roofing:  Certainteed 30 year architectural shingles, Hollow Green, over new 30# felt, with drip edge, starter course and ridge vent to match.  _____(Quantity)__ squares @ $_________/square = Total Cost $_________________.

If there is huge discrepancy between bidders on Quantities or $/quantity, find out why. (remember, the contractor has to put his overhead costs and profit somewhere, so there WILL be some mark-up).  Since you know the costs you can see if the contractor is gouging you.

You can also write into your materials contract that Contractor is allowed X% waste (5% to 8%) on indefinite quantity materials and X% mark-up (5% to 20% depending on complexity) for all materials.

It is not uncommon for contractors to be able to purchase items cheaper than you can due their purchase volume. I find in many instances I actually save money with contractors purchasing items.

If done correctly you will not be responsible for materials until the job is complete, and until you have signed off on the completed rehab.  It is all risk mitigation.

Roslynn,

I am both a park owner and an engineering/construction professional.  I cannot count on all my fingers and toes the number of reasons that you do NOT want to buy the materials for your contractor. 

If you have a trustworthy contractor, then they won't take advantage of you.  They will buy the materials, make a fair profit on them, and install them.  If you want to ensure a fair profit and no more, then bid the work to 3 or 4 contractors.  Don't bid it to more than 4 because if they're bidding against 6 other contractors then "if I get the job I don't want it; I must have forgotten something".  More than 4 bidders is counter-productive.  

Now, if you do provide materials, and your chosen contractor is the type that will take advantage of you, you have provided that contractor uncountable ways of taking your money. A few Examples:

a) Material is not on site, through no fault of yours.  Your contractor doesn't care; they will simply charge you for their non-productive time.  On most mobile home rehab projects a few hours of crew time FAR exceeds any amount of savings you would realize purchasing your own materials.

b) If you provide the materials, are you going to be there at all times to unload them?  If not, you're going to pay the contractor to unload them.  Are you paying them to inspect them as well?  If not, and the contractor goes to install a window, or bathtub, or stove...and there is damage, the contractor will look at you with a helpless look and ask "Do you want me to put the broken one in?".  You can blame the contractor, but couple with another helpless look will say "Well, I didn't do it.  It must have happened during shipping, or storage, or the kids in the trailer next door must have done it." In any case, you're still paying for it, AND dealing with it.

c)  Material comes on site, it is perfect, it is not broken, BUT it doesn't fit.  Since it doesn't fit, Mr. Contractor will modify a few things to make it work......for a nominal fee.....AGAIN way more than you ever saved on mark-up for that item.  Your material not fitting is not the contractors problem, unless you were VERY specific and made the contractor responsible.  To save you grief, let me just tell you that you cannot be specific enough for a low-ball contractor; they will get you. 

d)  Walls have bows in them.  NOT his problem; you supplied the crappy lumber.  The         lumber yard didn't "crown" the studs so the Contractor installed what YOU supplied.  He can take it out and put clean, straight lumber in.........for a nominal fee.

e)  All your lumber, drywall, corner bead, sub-floor, deck materials were delivered to your home site surrounded by OTHER mobile homes, neighborhoods, etc.  As framing work comes to a close, your contractor tells you you're short, 22 studs, 8 sheets of OSB, 6 sheets of drywall, 2 buckets of drywall mud, and you have no base molding.  You KNOW you had these all delivered, but they are not there now.  MAYBE they are being used on his other job?

        *  Garbage disposal doesn't work after installation. NOT the contractors problem, all he did was install it. YOU bought it and it doesn't work.  YOU take care of it...and he won't charge you to re-install it if his electrician doesn't charge him.

*  Stove doesn't work; not his problem.

*  Dishwasher doesn't work; not his problem.

* Refrigerator doesn't work...Furnace.........windows don't slide, doors don't open, flooring doesn't lay right, faucet leaks, bathtub has a chip, , etc, etc, etc.

I'm guessing by now you get the point.  

Lets, for fun, run some numbers:

TOTAL Material cost for an average MH Rehab.....lets go with $7,000.  Lets say for example your contractor knows he has you on your heels so he puts an outlandish mark-up of 25%, for handling, off-loading, storing, INSURING,  and warranty on the material.

So you end up paying:

$7,000 x 1.25 = $8,750 for $7,000 worth of material.  Wow that is too much..............or is it?

In EITHER case, you have to pic the materials and specify what you want. (leave OUT size, make the contractor measure and be responsible for fit.)(i.e, you order 10 squares of roofing.

What YOU DON'T have to do:  Arrange, and be responsible for, delivery.  You don't have to coordinate with your contractor, the supplier, and the wholesaler. Lets say you have to order 20 items and get them delivered.  Say it takes 30 minutes each for "coordination, follow up, quality control, storage, etc.)  20 x .5 hours = 10 hours of your time.

Lets say there are 2 windows broken on site:  Did it happen during shipping, unloading, or storage.  You didn't buy them, so you don't care.   Instead of an hour long trip to investigate, determine cause, which will almost never be certain unless you were there and personally unloaded everything, and another couple of hours of re-ordering, re-coordinating, and following up, you get to say "take care of it".   Save another 3 hours.

Lets say something like this happens, or shortages, or wrong color, or wrong item, or wrong.....10 more times; Another 30 hours of your time.  PLUS your contractor doesn't get to charge you for delays.  11 delays x 2 hours/delay x 3 men x $15/hour = $990.

THEN....3 months down the road, the dishwasher quits working.  You can spend 15 hours dealing with it, or 3 hours getting your Contractor to fix HIS material.  (1 year labor/installation warranty)

I could go on and on, however lets just see where you are:

$1875 too much paid for material

-$990 from contractor delays = $885 additional costs

10 hours + 33 hours + 12 hours of your time (very simplistic example) = 55 hours of your time saved.

$885/55 = $16/hour you paid yourself to deal with this.  

Your time is certainly worth more than $16/hour, isn't it?

There could be more or less, but there will always be issued if you provide the material.  

Find a responsible contractor and let them do their job.  For those of you who "can't find a responsible contractor", you're either not looking hard enough or your demands are unrealistic.  There are on-line resources everywhere for finding good, reliable contractors.  

I have seen it every day for the last 30+ years of construction; you want $1000 worth of construction for $600 dollars.  Would you do $1000 worth of work for $600?  Whatever you do for a living, I guarantee I can find someone that will do it for 40% less. Should I use them without expecting some performance sacrifices?  Are they as good as you?

 In construction, as with most things, you typically get what you pay for.

DON'T STEP OVER A DOLLAR TO PICK UP A DIME!

Double my holdings.

I just dug this up on the NC DMV site.  From:

Manufactured Housing In North Carolina: Current Issues and Future Opportunities NC Housing Coalition Written By: Courtney Weill, NC Housing Coalition

Pre-1976 homes vary in quality. Some still exist in good condition; others are in disarray. Images of these homes Ð which often feature metal roofs and metal siding Ð help propel the general public's negative perception of manufactured homes. As of 1990, pre-76 homes accounted for 38.5 percent of the almost 358,700 occupied manufactured homes in North Carolina. This older stock is often used as rental property and occupied by people with the lowest incomes. This rental market impelled Wilkes County to ban the transport of pre-HUD code homes into its jurisdiction, stated County Planner Paul Robinson.[36] Many other N.C. counties have the same policy. Due to the absence of quality standards, many homes built before 1976 have a shorter lifespan than modern manufactured home, and therefore, they are now quickly deteriorating. However, North Carolina had quality of construction standards for mobile homes before HUD code was enacted. In 1969, the N.C. General Assembly passed a law that required homes manufactured, sold or offered for sale in the state meet the Mobile

Make sure it is even LEGAL to move a 1974 Mobile Home in NC.  In some states you are not allowed to move a MH that old.

DMV website probably has it somewhere.

No.  4 hours away.  I have a local manager that takes care of things for me.  I give him $300/month to cut grass, collect rent, show houses, general upkeep of the outside and make sure things are as should be.  He lives in the park and has an interest in keeping it nicer.

I own a small park in a small town.   I bought it to "teach" myself everything I have learned through bigger pockets and other forums before I take my learning and scale up.

I made a point of buying a not-so-good park in a small town with an adequate economy.  Just an average economy, but small, not a lot of growth, and not a lot of prospects.  The park was cash-flowing when I bought it but just barely.  I bought it cheap, and figured I could add value.

So, what have I learned:  

A)  My theory is working thus far (have only owned it for 7 months).  I am slowly making the park a better place, both the live in and for the city.  The city is aware of me, and what I intend because I made a point before I purchased the park to go to them and tell them my intentions.  Like everybody, they want their town to be as nice as possible; I am going to do my part.  What was an eye-sore is slowly turning into just another place to live in town; not a ghetto.  In addition, the water department, electric company, sewer department, other landlords all know everybody.  It is pretty easy to find out how good a prospective tenant has been in the past...and what you can count on in the future.

B)  Simple is best.  Don't get to fancy with your deals, ideas, or options for prospective tenants.  They want a place to live that they don't have to worry about.  If you give them a nice place, for a reasonable price, your trailers will fill up as fast as other places.  Good value is always attractive as long as there is a consistent need for housing.

C)  PETS ruin mobile homes; charge a steep premium for pets.  I.E., the cost of replacement flooring every 6 months to a year added to the standard rent; especially cats.

D)  Be consistent.  EVERYBODY has a story. Listen, but don't let the stories dictate your next deal.  Pay attention to your business plan and be consistent with your direction.  That is not to say that you can't modify your plan if the same story keeps repeating itself.  For example, in my little town, I have had to finance the deposit over for several tenants.  They are good tenants, they pay every month, they just don't have several hundred dollars to put down for whatever reason.  Financing deposits is not how I started but how I landed some good tenants.

E)  Get rid of the bad tenants immediately.  Show the good tenants you intend to make the place better and they will help you.

F)  I would buy a park in a small town again.  I won't get rich, but I will have a nice small, steady, income for as long as I want.  My value added prospect is slowly working.

I can't afford a large park so this is all the fun I can have for now!

Tawny,

$24,900 is WAY to much to pay for a 1979 mobile home, if you're only getting the home.  If you're getting land, and already connected utilities, etc. then perhaps not.  BE CAREFUL of the 1979. Usually very poorly insulated, roofs are old, pipes are pre-pex (and you do live in NH) so they can/will freeze easily. I would stay away from a trailer this age unless they it is in GREAT condition.  In fact, I just tore 2 of them out of my park.  GET AN INSPECTION!!!!

Similarly for the the 2000,$38,000 looks like way to much to pay if you're just getting the trailer.

There are usually a ton of mobile homes, in parks for sell for much less, or at least can be negotiated for much less if you're not dealing with a dealer.  Also, very frequently, homes on land for substantially less.  GET AN INSPECTION!!!!

Sam