All Forum Posts by: Reid Hanley

Hi BP,

I am looking for an estimate of what an 'average' per month expense will be for RV lots where I the park owner include power and water in the monthly rent?  For this example, let's assume the RVs have 2 ACs and are all electric (no gas).  We are in NW Florida, so our winter can be moderately cold in Jan and Feb and we also have to deal with May-Oct high heat and humidity (high AC usage).  Can anyone estimate what the power/water bill would run per lot based on this scenario?

Thanks in advance!  

Hi BP,

I have my third Mobile Home Park under contract in Pensacola, FL.  It's a 29 unit park and has a lot of deferred maintenance repair ahead.  I just found out that the water is on a master meter and according to the seller the bill can run as high as $2200 some months (OUCH!).  I want to put in submeters on each location to pass this expense back to the tenants.  For those that have done this themselves, can anyone recommend particular brands of submeters and provide any feedback on their experience putting them in?   Any tips or input is greatly appreciated!   I am handy and have a lot of experience in plumbing already, so I think this is something I can handle.

Thanks in advance,

Reid

You didn't mention anything about HVAC - does it have one currently or does that need to be replaced too?  If you need new central ac/heat system that will add $4-5K more.  If you go with all window units they will need heat too for IN winters, so probably $500 (x 3 or 4 units) = $1500-2000.

If it's a 90's model it likely has a gable roof.  I'd strongly consider a roof over with a 26 gauge metal roof.  I'd sub it out so it's done right (unless you know how already).  Make sure the roof overhangs the eves by 10-12" so water runs off onto the ground and not down the side of the home.  It should run you about $2500-3500 if you sub it (materials included).  That will be a huge selling point for your potential buyers.    

Whatever you sub out, you should provide materials and pay for labor only.  I have spent a lot of money letting contractors supply materials only to find out they mark them up 20+% because they went and got them - you should do that yourself - there's a lot of education to be had in procuring materials.

Lots of good content on youtube about MH remodeling - check out Drews Mobile Home Repair channel.  Has some great roofing and floor repair videos.

Best of luck!!

@Diana Walcott Here's one thing you are missing in your example:  you are keeping your Op Ex the same amount in both the all POH and the all TOH scenarios.  That's not how it will play out over time.  Over time, since you own all the POH your operation expense ratio will be much closer to 50% not 25%.  It is very reasonable to assume a 25% operation expense on just the land - septic tanks or clogged sewer pipes, road repair, landscaping and tree damages...etc.  But when you have to fix toilets, repair or replace leaking windows and roofs, repair or replace the floor damage from the aforementioned leaking windows and roofs, tenants destroying appliances,..etc. on top of all the land expenses your Op Ex will increase significantly.

One off the good thing about the 70's 2/1 mobile homes is that they are only about 750 sq ft ( I own several of them) so you don't have to put a ton of $$ in to them to improve them - as long as you don't over pay for the labor! If you live alone 750 sq ft might be enough, but it gets pretty small once 2 or more people live there, so be sure it's a good fit for you if you plan to live in it for a while.   Also, do good DD before you buy...don't get blindsided by a bad well or septic at the end of its life.

You need to really understand your market to make this decision.  Don't assume anything.  Do the research.  I'd post an add on FB or CL advertising this home for rent at $1200 to see how much demand there is.  If you get enough interest it may be worth it.  Also think about your exit in case you had to sell.  Could you sell it for a profit (or at least break even) in the near term?  Good news is that's not that hard to do.  Call some realtors, search FB and CL for similar properties,..etc.   Good luck!  

Happy to talk it through with you.  

It is definitely possible to BRRR it but it has a few challenges. First you need to find a lender comfortable with lending on mobile homes used as investments properties. Local banks and credit unions may be your best bet. We use a regional bank in our area. They will probably want the home classified as Real Property, not as personal property (like cars are) so it's considered an improvement on the land.

Another challenge is insurance.. Depending on location it can be hard to find at all.  And finding enough coverage that will be in line with the amount of money you borrow against it can be a challenge too. Many insurance underwriters will only look at the actual age of the unit, not the functional age after you make all your improvements. You can expect to have to jump through all the same hurdles hurdles as normal houses and also a few others ( i.e. proper tie down, etc.)

All that said, we have one we did that is working well.  $80K invested. Appraised at $110K.  Cashed out refi $80K and is cash flow positive close to $600 each month.  

You can do it too!

You have to know your local market and your state regulations (if any exist on rent changes).  A few phone calls and trips to see the other MHPs in your area will tell you quickly what the market lot rent should be.  If your park is way under the market rent of comparable MHPs, then let the tenants know in advance about the lot rent increase (60-90 days is fair I think) and then make the increase. I believe in the band aid approach over small increases that take a long time.  Hopefully you'll be making some improvements to the park for the residents to feel better about the increase, but IMO it's not fair to you to take all the risk and expense of owning the asset AND keep your lot rents lower than market.

@Avery Robertson between Frank and Jack's answers you have a great base of DD knowledge to follow.  Unfortunately, experience is one of the best DD teachers, so if you miss a few (or get a few wrong) it will end up teaching you lessons for the next go around.  The wisdom those guys have shared is based on a lot of lessons learned I'm sure.

I'll add one point about Titles which is hugely important - if there are any POHs in the deal always make the seller show you current titles to them all in their (or their company's) name.  MH's are personal property and you need clear title to sell them, just like a car.  You can not sell these to owner occupants in the future if you don't have the title to them in your name.  Many Mom and Pop's have bought used MH's and never properly changed the title work after because they knew they would keep them as rentals.  Dealing with title issues to these MHs can be a huge pain.

 We did not use them.  We did our own DD.  We bought our park about 2.5 years ago and have just been learning what to look for in other parks the old fashion way...lots of hard work and mistakes

.