All Forum Posts by: Roger D Jones

Steve,
It is true PE and investment groups have been gobbling up the market over the last 10 years- so much of the 'great all TOH parks' are more and more difficult to find.  That being said we as private investors can use this to our advantage and find some successes in POH parks or mixed POH/TOH parks.  I would focus my attentions here and try to stay local (within a 4 hour drive) as the POH rentals require more engagement.

Financing is a tough deal... but sometimes you can find those Mom and Pop operations with quite a few POH rentals that will work with seller financing on a reasonable interest rate with a balloon within 5-7 years.  That gives you time to get organized and established for more conventional financing.  Just remember though unless you have deep pockets you need to at a bare minimum stay cash flow neutral until you get the property running and your debt paid off.  

As for Frank and Dave at MHU.  An absolutely amazing forum that has an answer for any question you could ever ask... search the forum or ask.  I am not a huge fan of them personally as they are PE investors and have a very, very narrow view of the industry and how it should be approached.  Just my opinion though for what it is worth.

Emory,
Great question but a lot to unpack.  Are you looking at the maintenance/repair costs of the homes once in place, W/S/G costs. septic expense if applicable?  Best way is to just try to break it down piece by piece.
Water- how is it being delivered to the homes.  Well?  City water with one main at the street and how will they bill.  One meter reading for all usage or like some small communities a set price for each occupied home?
Sewer- Septic or sewer lines.  Again... how is it metered?
Garbage- Dumpster or can you get can service?  
Taxes/Insurance- depends a lot on where you are located.
The homes themselves- POH or TOH?  New or used?  And if used POH... how used?

I have all three kinds of parks- LT RV, POH and TOH so can help with repair estimates but so much depends on location and access to reliable repair services.  For my POH park I have a hourly PT maintenance manager who keeps our rentals in shape.  As you develop the park I would strongly recommend your homes be individually metered for water, sewer expense prorated and garbage paid by tenants via individual can service.  Just keep those off your P&L right from the start.

If you have questions on the maintence percentages on the POH homes... lmk and I may be able to help.

Go to the DMV with the VIN or ID number of each trailer.  Should be on a metal placard on each trailer.

Sam

Everyone here is providing great points to consider and if you were my son I would say that at 360k this 'dog needs to get put down'.  As Sean above alluded to- never pay a seller for your future hard work, risk and stress.  All too typical park owner who took all the profit out of the park without reinvesting in the business then wants to sell you the potential he was too cheap to invest in.  You pay for what it is... not for what it should be or could be.

Later Pal

Rog

Diandre,
No idea what your leverage is on those seven rentals is or if they are all levered into one another but as much as you need cash you need time.  Time for the economy to reset and interest rates to come down.  You can go to a CU or local bank but they want a wad a cash from you for skin in the game and your going to have a rough interest rate.  Same thing with any investor you get in bed with.

With time you can work some equity into those rentals and when interest rates come down you will be in a better spot to sell a couple SFHs.   Agreeing with @Dominic Mazzarella I would go to your uncle and ask him how much he needs monthly to sell with zero down and a 7 year call and balloon at the end.  You might have to give up some income from the rentals but it gets you ownership of the park and time to fund long term financing.  

Quote from @Janine Sharma:

Thank you! This is very helpful!

 Anytime... we have one accountant who focuses on our MHP and multifamily clients.  Any questions just ask.  I am no expert and just do what I am told.  

Try looking for lower priced mobile homes on private property that need to be moved.  Find parks in the area that have open spaces for mobiles then negotiate with the park owner for 6 to 12 months free space rent or for them to pay the moving costs.  Once you get the home in the park do your remodel at that point and flip it from there.  The park owner will want a bullet proof guarantee that the home will look great when completed and you will be on the hook for the space rent as negotiated until it sells. 

Just had a young entrepeneur do this in one of my parks.  Gave him 10 months free space rent and paid for all his utility hookups.  He is renting the unit and will carry a bit of debt for a couple years but once he is clear of that he will do very well for himself.

Park owners want their empty spaces filled.  Use that to your advantage.  Be sure to understand the financing options out there for mobile home buyers and if you opt to carry the contracts on the homes you sell you should do some research on Dodd-Frank regulations.  I know nothing about that stuff but hear it mentioned all the time.

Janine
I am next door to you in Washington and you can go either way. We have a few parks and we utilize both options. Much of it depends on what your needs in the park will be.  

If your manager is just 'keeping an eye' on things, collecting/reminding on a few rents here and there and some light cleanup while being compensated in free or reduced space rent then classifying them as 1099 subcontractor is great.  Their dollar compensation is their free/reduced rent.

If you have a lot of maintenance with landscaping or POHs then you hire them as an hourly employee.   For our larger park we have a 'Maintenance Manager' set up for up to 24 hours per week as needed with OT for after hours emergencies.  The IRS is very clear about the distinction between the two scenarios.  1099 subcontractors provide their own tools, set their own schedules are not directed by the hour.  Employees work for you and do as instructed with your oversight.  You can do it either way and reality is you will never be audited.  It is your park to run.

But there is a cautionary side to this tale- you should pick one of these two options.   Far too many parks just 'give' a resident in the park free space rent to keep an eye on things and do light maintenance with no 1099 reporting.  If that person were to get hurt somehow and then expect you to pay the medical bills or become disgruntled in some way it is just a phone call to DOR, OSHA or L&I.  Your park name has now landed on someone's government desk and you will eventually be forced to answer a lot of uncomfortable questions.  We also own an accounting/payroll firm and have a lot of MHPs, residential communities and apartment complexes as clients and have seen this happen a few times. 

Lastly and then I will stop rambling... and this is just my opinion.  I think it is pretty rare that people getting free space rent actually work enough to earn it.  We have another park with a free space rent manager and as we have raised the rents he continues to live there for free.  Good guy, little forgetful, but I wish we hadn't inherited this arrangement and it is tough to retract it.  We are eventually going to have to address this.

Quote from @Fred Scott:

@Roger D Jones:  Any insights on why the North Carolina purchase in Fund IV makes you nervous?

They paid 3.7 million for this property at 29% occupancy.  Park has experienced a mass exodus over the last 20 years with no explanation why.  Their plan is to raise rents (on the poor remaining souls, improve infrastructure and exert some sweat equity.  How are they going to fill the park?  "Leverage infill opportunities"... Typical PE investor double speak.

Well... they are who they are.  The PE investment feeding frenzy that started up 15 years ago as TOH parks started getting gobbled up is starting to slow as supply tightens.  This feeding frenzy has driven up park prices and there are fewer and fewer Mom and Pops to take advantage of.  The big stuff is gone and if anything does come available Mom and Pop know what it is worth.  I question when these PE groups start wanting to unload their newly inflated parks who is going to be willing to purchase them with no further upside.  

There North Carolina purchase leaves me scratching my head.  When PE investment groups start using terms like 'sweat equity' on near empty parks I get nervous.