All Forum Posts by: Celeste Fackrell

First, thank you both Curt and Jack.  It is nice to get some other opinions.  

Now, if I may and I am not trying to change anybody's mind, just relay my original thoughts.

Jack, I'm sorry for the confusion.  This is a 17 unit park.  8 are currently remodeled and rented.   I said there were 9 available lot rents that I intended to fill; this 9 does include the 2 existing lots with the rehab homes on them.  It is a small park but honestly, I want to start small, test my methods, perfect my systems (on-line and remote rent payments to answer one concern), add value, which will of course increase park value, then scale up.  

Curt, to discuss the no cash flow issue.  I don't need the cash flow now, as long as we're not going cash negative. I pushed to a 15 year mortgage instead of a 20 or 30 so that I can have it paid off in a maximum of 15 years. Truth be told I would love to get in that sweet spot where I realize annual losses after depreciation.

My plan here is, and I am confirming my belief with some more marked due diligence, is to get into the park with no money down and to add value by increasing rents slowly and consistently, renting vacant lots, and adding homes and getting them rented.  For example, for less than $10k each,  I can remodel the two remaining homes and rent them for roughly $450/month each.  This equates to a NET cash flow of approx. $600/month.  

For each $10k invested; another $300/month in NET ROI. That I believe is the beauty in this deal; a 36% ($3600/10,000) Cash on Cash return while the initial zero sum investment is increasing my equity on a monthly basis. By increasing total occupancy 4 more homes (to a total of 12/17 or only 70% occupancy) I achieve the following:

*DSCR of 1.7

*Cash on Cash of 36% 

*Ability to pay this thing off in 10 years (which I prefer).

The park will own the pipes after the meter which is typical.  To most this might be scary but I have been in the construction business for 30 years and have installed hundreds of miles of water and sewer pipe,  That said, I know I won't be on-site but I know how to sub-contract this work quickly and efficiently.

There is no gas in the park.  All utilities are paid by the tenants.  

MHs are all 90's except 1 which is and 88.  This park has been owned by the same person for the last 8 years.  He sold the park 2 years ago to a novice (yes, I am a novice MH park owner but not real estate investor) that did not manage the park, treated it like a slum lord and not surprisingly lost all but a couple of tenants and quit paying the bills.  The owner took it back over, cleaned the park, re-built the houses and has year leases on all 8 homes.

Demand appears to be continuing but I intend to try Jefferson Lilly's advertising for 30 days  (Podcast #111) to determine demand as part of my diligence.

Thank you both again for your feedback; I would love to hear from you or others again.

Have a GREAT holiday weekend!

Sam

Hello all,

I am considering investing in my first MH Park.  It is a 17 Pad site with 10 PARK OWNED homes.  8 of these 10 homes have been completely remodeled in the past 6 months; a nice job remodeling without being extravagant.  The other 2 homes are on-site and will need roughly $7k of remodel each to make them Rentable. This park is a plane ride and rental car away from me so obviously not perfect.  There is a local manager/handy-man that  has done a nice job for the current owner.

There are 9 pads rented at an average of $170/Pad plus all 8 remodeled homes are rented at an average Rental of $250/month in addition to the pads.  Total current monthly income is $3,500.  

Pad expenses, including the total burden for park taxes, insurance, utilities (city water and sewer paid by the tenants), property management, my travel (6 trips/year @ $500/trip), snow removal, mowing, small advertising, signage, and road maintenance budgets. Expenses total about $900/month for a total NOI for the pads alone to be $7,000/year.

As all the current homes have been very recently remodeled (gutted), home expenses are estimated at  $100/month/home for deferred maintenance into a Maintenance and Repair budget; total home expenses  - $800/month.

All totalled: the NOI as it currently stands is $22,000/year.

I can buy this park, and the homes, for $200,000. The Owner is willing to finance 100% of the purchase price at 6% for 15 years. My debt service would essentially be equal to my monthly NOI. There will be no early payment penalties.

If I close this deal; I would spend money to remodel the remaining 2 homes on the property ($16,000 remodel costs) and increase my NOI by roughly $600/month when these two homes and lots were rented. Once these 2 remodeld homes are rented, and equilibrium , established, I would either rent the remaining spaces to other home owners or buy and rent more homes to fill these spaces as the marked demands. Over time, I would sell off each of the homes so that in a few years, I will own the park out-right, I own no homes, and I have 15 +/- lots rented for my goals of long term passive income. (if I don't sell it off before for more money in a 1031 exchange for a larger, more lucrative park. I am investing for passive income in 10 years. Cash flow is not important to me now, as long as I'm not writing a check each month for this park.

OK all you Mobile Home Park experts: What do you think?

*   $200,000 purchase price

*   0 money down

*   6% interest on a 15 year note (worst case)

*  Expenses accounted for including $100/month/home in deferred maintenance savings (on newly remodeled homes)

*  10% Cap Rate

*  Monthly net income before financing = Monthly debt service (1.03 Debt Coverage Ratio)

* Large, manageable upside with the opportunity to add 9 more pad and/or home purchase and rental. (Potentially, another $24,000 NOI on the upside.

Honest opinions?  Any advice to offer?  

Thank you!  Sam

Thank you Robert.  I will give that a try.

Sam

I am looking at investing in other markets; some many states away.  Does anyone have a Go-To source  or two for market specific , economic, employment, and demographic data?

Thank you.

Vincent,

Those are FUN deals.....when they work.  I much prefer new construction.    Unknowns are minimal,  you get to build the structures the way you want them, they are beautiful from foundation to shingles when you finish, and there should be no maintenance issues for a few years.   

That said,  please proceed with caution.  What happens if you get the $2M, you get the property developed, and you get your buildings under construction.  Say you're leveraged to the tune of about $3M and the market goes soft, or plummets.  Can you service that debt?  This is very similar to what happened to me.  I was rolling in it and got stuck with this kind of debt in 2007.   I carried my debt for almost 2 years but finally ran out.  

The lesson I learned:  Put yourself in a position so you can take on a little water; but not so much you sink the ship.

Slow and steady is not as much fun, but it can save you from losing everything.  Make the deal, develop the property, build the structures, but don't lose site of your exposure at ALL times. 

Timing is everything in a deal like this.   From start to finish you're looking at 2+ years probably.   Are you prepared for that?