All Forum Posts by: Paul Stout

@Kevin Steer I have offered to purchase the home, I have traded the title for what the tenant owed me, and depending on state laws your attorney may file for the ownership to transfer to you one they are evicted since it is personal property left behind on your property.  It is counter-intuitive to pay a tenant to leave but it can be the cheapest route in the long run.  Also, depending on state laws, if you don't want the home you may be able to demo it very quickly and place another home.  Moving it may not be as simple as the aforementioned actions.  Your attorney can fill you in on those details.  

@Jane W. Is the discrepancy between the $175 future pad rental and the current rent of $375-$500 because the current homes are owned by the park? If so it is a mistake to include the home portion of that rent in the NOI. I would disregard it in the calculation. You can add a fair value for each home after capitalizing the pad rental. The next issue I see is that occupancy rate. Why is it so low? Is it demographics or management? I would have a very hard time paying a 9 cap on a 62% occupancy park with private utilities and a large amount of park owned homes. If the issue is management, infilling with new homes is not a simple prospect. It can be done but it takes cash. There are programs out there to help with that but you still have to find the homes. The lot only rents of $175 will limit you to used homes. You don't want to pay more for a home than the value it will add to the park. If the issue is demographics then you have a very high hurdle to overcome. A quick rule of thumb to see if you are even in the ballpark is lot rent only x number of occupied pads x expense ratio of (.4 for private utilities and .3 for public utilities) x 12 / cap rate. Private utility parks usually trade at higher cap rates than public utility parks. You can add something for park owned homes or contracts on top of this. Don't overpay for these. Most park owners expect you to pay retail for homes and full value on contracts. That is dangerous. This is just a rule of thumb. There is a lot to this and it is quite different than any other asset class. Be sure to get educated before jumping in.

If anyone has a deal like #2 and can't get over paying a 7 cap on an MHP please send it my way.  I'll pay the 7 cap.  Great explanation @Andriy Boychuk.  This looks like a pretty good deal @Shawn S.  I agree with @Tyson Cross on the insurance expense. I think your overall expenses are a bit low. If the home rental portion of the park owned homes is in the gross income you might want to take that out. The 12.5 cap could make up for a slightly high NOI so at $800K it still looks good on the surface. Proper due diligence will verify that.

@Mitchlyn D. Mobile home parks are unique investment vehicles and must be understood prior to investing. A major mistake that is made is capitalizing the home rent. That appears to be what is happening on this thread. You must only capitalize lot, not home rent. You can add a fair purchase price of the home. Determine what similar homes sell for in the area and offer something that you and the owner can be comfortable with. Not knowing much about this park I would say $145,000 (which is the price I am assuming you meant to type) is about twice the fair market value of that park. You would need to offer much more information to verify that but I am certain that I am closer to the actual value than the seller is. Please search my previous comments and others regarding valuation or evaluating mobile home parks to get the formulas and so on. A down and dirty rule of thumb is lot rent only X number of occupied pads X expense ratio (anywhere between 30% and 50% depending on utilities and who pays them) X 12 months / cap rate (typically 10-15 for a small park). Once you establish the value of the park you can negotiate purchase of the homes separately. If the homes are worth $5,000-$10,000, capitalizing them as you do the park will value them at many times that. Just run the above formula on the delta between home rent and lot rent and you will see what I mean. Small parks can be difficult because they have a hard time supporting a Manager. That cost needs to be factored into NOI as well.

@Roland Brown you have to do that research yourself and the best way is to locate every park in the area and call each one to find out what they charge and what they offer.  I own a mobile home park, a storage facility, I work a full time construction job, I sell real estate as a licensed broker, I work part time as a teacher, and I have a wife and two young children that I spend time with every day.  I manage all of my investments myself and they are very successful.  It can be done.  Time management is the key.  Energy drinks don't hurt either.  The proper way to do it is to have an on-site manager.  I am purposely foregoing that step so I can learn all I can.  My properties would easily support a manager.  That is very important.  The property must support management regardless of whether you manage it or have it managed.  The next guy may not but he will probably carry that cost when valuating.  Before you consider buying, learn all you can about valuating mobile home parks.  It is not the same as any other commercial property.  If you valuate it like another commercial property you will most certainly lose money if there are any park owned homes.  I, and others, have posted many posts on how to valuate parks.  Frank and Dave's cd and books on eBay for about $600 are worth every penny.    Check out podcasts by @Jefferson Lilly, @Kevin Bupp, and @Account Closed.  If you would like to hear more about my story you can check out Joe Fairless podcast #734 and Mobile Home Park Investing podcast #44. 

I have two possible opportunities regarding signage that I would like to explore.  I currently invest in mobile home parks, vacant land, notes, and self storage.  I have tried researching billboard investing but haven't found much information.  I did find Dave Reynolds website.  I have found information stating that a typical wood billboard (not very interesting to me) costs about $25k and a metal (more likely what I would use) billboard would cost about $65k.   I'm hoping there are some billboard investors who can share some information with me.  I reached out to a few members who have billboards and marketing listed on their profiles but haven't gotten any responses yet. 

Deal #1: Vacant land for sale with 1500 feet of frontage on a major highway.

Questions:

What information do I need to gather to evaluate this deal?

Once I have the information how do I evaluate the deal?

What are typical construction costs of different types of static billboards?

What do I need to know about performing due diligence when making sure the local government will allow me to install billboards?

What are the typical maintenance and operating costs for different types of static billboards?

How do I determine rental rates for billboards?

How do I find the billboard tenants?

In the area I have seen static billboards that are double sided and two billboards high.  Are there disadvantages to going two high over one high?

Deal #2:  Business owner wants an electronic sign.  Municipality will allow a 200 square foot digital sign.  This is a very high traffic area. There are multiple businesses in the strip mall where the pole with a static sign is currently installed.  The current static sign has small  business names for some but not all of the businesses.  The anchor tenant has a large sign at the top of the pole.  The business owner does not want to pay for the sign but would be willing to pay monthly rent for a time slot on a digital sign.  There are many businesses in the back of the strip mall and around the corners on side streets.  The owner of the strip mall has agreed to rent me the spot on the pole just under the anchor tenants static sign. 

Questions:

How do you structure leases for digital sign time slots?

How many businesses can you efficiently rent a double sided digital sign to and how do you structure the time slots?

What are typical costs involved for buying and installing the sign?

What types of signs are out there and what are the pros/cons?

What would the typical cost be for setting up the website that allows the graphics to be loaded onto the sign?

Are there website templates or companies that specialize in building these websites?

Do the businesses load their own graphics etc.?

What else do I need to know to evaluate this deal?

What are the typical maintenance and operating costs of these signs?

Please help if you can. PM me if you are willing to discuss this on the phone or through email as that may be more efficient.  Thank you.

Thank you @Patrick Desjardins.  I appreciate you confirming my initial inclination.

I am in total agreement @Jay Hinrichs and @Roman M.  You can see the deficiency this will cause in the settlement if it is valued at face.  In my opinion that would be tantamount to putting full new purchase price as the value on a vehicle that is 10 years old and doesn't run.

I am not certain what the best forum category for this question is so I placed it in two.  I would like to pose a question to all of the note buyers/sellers out there . What are the steps to assigning market value to a note? This particular note is unsecured and the borrower is high risk. The note is held by a husband and wife who are currently going through a divorce. They are currently placing values on all of their assets and the wife is planning to take 100% of the note since the borrower is a family member of hers. They are placing market values on the home, cars, etc. but she is placing face value on the note. I am of the opinion that the note is no different than a car or a house. The face value (akin to the home or auto purchase price) is irrelevant. The credit/debit on the final divorce agreement should place market value on the note just like the cars or house. I think it would be unjust to the wife to credit the husband half the payoff value of this note (approximately $70k). My opinion is that this note would have a market value much lower than the face value. This is a non-performing, unsecured note. The borrower is on the verge of bankruptcy and has missed payments. The original (handshake) agreement was that the full amount would be paid off in whole with no interest. That deadline was missed and a payment plan (written, I have not seen it yet) was agreed upon and does include a low interest rate. I would like to help valuate this note so the wife does not get taken advantage of. Also, I would not be opposed to purchasing the note and restructuring it. I believe that the typical family law attorney would not know notes have market values unless it was pointed out to them. It is common sense to most investors but non-investors would probably never even consider that the note is no different than the other assets in this regard. Thank you in advance for your assistance.

I would like to pose a question to all of the note buyers/sellers out there .  What are the steps to assigning market value to a note?  This particular note is unsecured and the borrower is high risk.  The note is held by a husband and wife who are currently going through a divorce.  They are currently placing values on all of their assets and the wife is planning to take 100% of the note since the borrower is a family member of hers.  They are placing market values on the home, cars, etc. but she is placing face value on the note.  I am of the opinion that the note is no different than a car or a house.  The face value (akin to the home or auto purchase price) is irrelevant.  The credit/debit on the final divorce agreement should place market value on the note just like the cars or house. I think it would be unjust to the wife to credit the husband half the payoff value of this note (approximately $70k).  My opinion is that this note would have a market value much lower than the face value.  This is a non-performing, unsecured note.  The borrower is on the verge of bankruptcy and has missed payments.  The original (handshake) agreement was that the full amount would be paid off in whole with no interest.  That deadline was missed and a payment plan (written, I have not seen it yet) was agreed upon and does include a low interest rate.  I would like to help valuate this note so the wife does not get taken advantage of.  Also, I would not be opposed to purchasing the note and restructuring it.  I believe that the typical family law attorney would not know notes have market values unless it was pointed out to them.  It is common sense to most investors but non-investors would probably never even consider that the note is no different than the other assets in this regard.  Thank you in advance for your assistance.