All Forum Posts by: Bill F.

Thanks for the responses!

@Rachel H. Is septic/well something that you would have in the job description of your manager?

@Andriy Boychuk So I assume you would only buy the park if you could get the permits to hook into the municipality’s water and sewer?

@Gary Domermuuth Has the elderly women broken her lease or the law in any way? I personally don't get involved in personal disputes between  tenants. Unless charger are being pressed, you just set yourself up to be their referee. 

Both parties are adults and can handle their issues. A course of action is for one side to move, but that is their choice.

@Carlos Cevallos If you look in some older multi family units, they only have one meter for the entire property. Sometimes the owner can pay to have the unit sub metered and bill the tenants for what they use, but that is not always feasible.  For instance there may not be dedicated hot and cold water lines for each unit or more than one unit shares a water heater.

@JD Martin and @Ronald Bourgeois Thanks for the responses. My question is more of hypothetical; holding all other things equal I'd want city sewer and water too. 

There are a few parks around me that have city water but have septic systems and am trying to see what are issues that can be mitigated and what are show stoppers.

@Account Closed in the case you described the highest and best use of the land changes and with it the value. 

However, Real Estate Investors analyze risks through the lens of severity and likelihood with an eye toward find value where others have misaddressed either the severity or likelihood. Are you saying the probability of wells drying up or septic systems failing makes parks with those an asset which will loose value?

Hoping to tap into the vast experience of BP to get some real world knowledge. In my very limited research into MHP, specifically screening parks to make offers on, I keep hearing a number of successful park owners (Jefferson Lily BP Podcast #111, Kevin and Charles in their Podcast “MHP Investing” come to the top of my head) say they won’t look at any park with a septic or well. On the Marco level I understand the reasons for this; increased exposure to enormous repair costs make it a no brainer all other things being equal.

My question is, with more and more people entering the MHP space, will this continue to be a sustainable filter? With that I all being said I pose the following questions:

1. If you had to have one, would you rather have a well or septic and why? Which has the least risk?
2. If you were buying a park with a well and septic what special type of due diligence would you conduct?
3. What are the specific concerns with well and septic, above and beyond increased maintenance, that lead people to not even look at a park with one or both?

Thanks in advance for your help and input!

@Carey Green That's a good opportunity for you to play his game. See if he'll knock 10% lol 

Money Talks

@Carey Green

Its a solid base hit of a deal at the numbers you listed, no doubt.

I think the two biggest issues you'll run into are: 

-Raising capital given the current returns a structured. Its hard to raise money at below a 10% IRR

-Finding a way to sell the properties quickly and having a stable plan B in case you can't sell them. The longer it takes to sell them the lower your return.

The largest risk I see is a market slow down, but you are getting away from MFH so that decreases the risk a bit. 

The price is what's causing you to have single digit returns. If you show up with all cash you think the seller would knock the price down by 5%? 

Yea, I can see the rental return way below average. Using the 50% rule you'd pull a 3.5% Cap Rate as rentals. That dog don't hunt when you are looking for the type of capital you need. The seller is getting more like a 8 or 9 Cap if my assumptions are right about his purchase price.

How quick do you think you can sell all 32 units? Are you thinking equity partners or hard money?

@Carey Green That's quite a pretty penny. I bet the seller bought them for around $2.5m if he is using straight line depreciation, maybe less if he accelerated it. So, he'll double his money at least! 

Your realtor buddy going to be an investor and wave his commission? At 3% he'd get over $150K. If the market is as hot as you say it is, you'd still make about 13% CoC after paying a full 6% commission, little less if you throw in closing costs.

What do the returns look like as rentals?