All Forum Posts by: Tyson Cross

How'd it go? Sorry I missed it!

Rebecca has good advice. I would also advise to reach out to a local attorney in Portland who can help you with business and legal structuring, but also find an attorney local to the state you invest in for tenant/landlord protections. If you google best real estate attorney in Portland you should be able to find some in Yelp. If you want, email me directly and I can give you some local recommendations. Good luck!

@Shawn S. at first glance he is spending too much on repairs. If he only has a few park owned homes, what is he spending the money on each year? 30k in repairs  is a lot! You can see in 2016 he had some major expenses to take care of. This is why due diligence is critical to understand when you're buying the park. You'll want to address these items in your analysis and understand what capital needs to be put into the park when taking over. Leaks should all be taken care of prior to you owning, especially if he is already addressing those. Sewer lines as well. You will have tree trimming and tree removal occasionally, that is just the reality. But without getting too far into it (I'll have more time later) I can see his repair line item is a big one. 

@Account Closed I want to find deals like those! especially that last one..!! :)

@Andriy Boychuk nailed it exactly above. That is exactly what I was referring to. It's not where you buy it, but where you can take it after buying it. You're looking for the value add deals essentially. 

@Shawn S. Just off the top of my head, here are some things to think about:

Taxes and insurance are way too low. Insurance rule of thumb is $50 per lot per year, so in this case you'd be looking at $2,100 per year. My guess is his coverage isn't adequate for what you should have. The other thing you need to consider is insurance for the park owned homes. You'll likely pay this while you own the homes. You will also pay personal property taxes for the homes too. Additionally pull the real estate taxes on the county website. I'm sure they will be more than that - or at least check to make sure they won't change upon the sale of the property.

Are the water expenses billed back by the owner or direct billed? If billed back, there is likely some leakage. Also, what about any other utilities? Any common area street lights, office buildings using utilities?

Double check the septic expenses. I don't know much about septic, but I'm guessing there may be expenses related to inspections and maintenance that would bring that up a bit. Check with @phillipmerrill to get more info.

If you raise rents how much will those be? there will likely be people that move, you will have eviction fees, turnover costs etc. You'll likely want to budget for travel if you're not local, admin fees, possible snow removal, licenses/permits and capital reserves. I think your management fee is a little high, but that's okay you can obviously adjust that.

Without taking into account the park owned home income, I would target a price of around $700k, but maybe closer to $800k if there is upside in the rents, especially considering the park owned homes. This is the reason I asked about the upside in the rents. People always make a big deal about what cap rate you buy the property, when in reality it matters more where you can TAKE the property once you implement your action plan. If I buy a property at a 5 cap, but know the rents are extremely low and I can bill back water and cut out a huge management fee, so that in 6 months after taking ownership I have a 12 cap, then that is a great deal. It's really more about the upside and where you feel this NOI will be 1 year from now, using more realistic expenses.

I hope that helps. It was quick and dirty, but feel free to hit me up with questions.

@Shawn S., what market is this park in? What is the average lot rent there? And how did you come up with the value of the park owned homes?

You are going to assign the contract or do an option to purchase. pm me if you want to discuss.

@Clint Looper. definitely sounds like there is some upside if you are in an area where you can A) bring in affordable homes that have market demand and B) have the capital and/or the time to do the turn around. Since it's 30% occupied, buying on a 10 cap is great - only potential upside. Is there any additional room to improve current operations? What is the market like? A park is only as good as the market it is located in - which means there needs to be jobs. But off the limited info, you did great negotiating it below ask! That's always a WIN no matter the upside.

Happy to help. Let me know when you get more info if you have more questions!