182 Mobile Home Park


#1

This is my first crack of buying a Mobile Home Park, so I would like

everyone’s input on a checklist of what I need to find out before I make a decision.

I appreciate all your input.

Thanks

Rich Koontz

217-562-7137


#2

Rich, I believe the only viable , realistic approach to a mobile home park is to make sure you are buying a location of park with great potential land appreciation. After lurking here and doing a little research it seems that there are to two avenues of making money off a mobile home park, buy it and sell it asap to the next guy, because unless you bought it in a location that is going to appreciate on the land within a reasonable amount of time it is a loser. In other words it seems to me that the declining assets of the mobile homes themselves only serve to “hold the fort” until you can sell it. Now there is nothing wrong with that but a smaller older mobile park is only going to give you minimum return for a lot of work.

I am not being critical of people who make the informed decision on what they want to do but just be aware it is not a slam dunk. I truly believe land appreciation (true of most rental property) is the prize. Talk to some truly honest people who are trying to unload their older smaller parks, or the guys who got in over their head. With the tenant base and inherent problems mobile home parks can be a major drain of energy and resources. If you bought an average mobile home park with 5 to 10 year old mobiles in ten years what would you own with out great land appreciation? a bunch of old trailers and bad tenants , you would be praying to unload. Just my 2 cents to shed some realistic perspective. I do appreciate and commend the few who can turn around a park and make a go of it, but that is 1 out of 20 and they earn every penny. Can it be done , sure if you work you tail off, buy right and know what you are getting into. one out of 20 Good Luck and stay real Garry


#3

Garry with all due respect, it appears to me that you have very little understanding of mobile home park investing.

Any investor who buys with the sole profit center being appreciation of the land based upon location is NOT an investor, they are a speculator.

There are many ways to force appreciation in mobile home parks by increasing income and decreasing expenses. Filling empty lots, upgrading homes and tenants are but a few examples.

If you are simply buying a park “to hold the fort” as you put it, while land appreciates you are missing out on a great deal of profit and inviting a great deal of headaches (that part I will agree with you). The headaches need to be addressed to become profit centers or reduced expenses which in either case create value that quickly increases the value of the mobile home park.

Speculating if the town will grow to your park is gravy. Holding out for a Wal-mart to buy your land as a better use property and paying big bucks for it while you spend years “holding the fort” with poorly managed mobile homes is truly speculation and most likely a terribly frustrating experience.

Your premise seems to lack the understanding of how mobile home parks are valued. The value is based upon income, not land appreciation. The exception only comes in when the land does receive a wal-mart type higher and best use bid but I stress that this is the exception and should not be the planned exit.

Here in my town Wal-mart was set to buy an old mobile home park next to Lowes to build a new store. The park owner no doubt had hoped this would occur and it was going well until the liberal populace became so upset about the idea that the tenants of these older homes would have to move raised sufficient caine that wal-mart decided to buy a bigger lot a few exits down the highway.

The park owner is now stuck with his run down park until and if he can sell to another “higher and best” use store that somehow meets with community approval. The point is that all of the sudden there is a controlling factor in your exit strategy of appreciation that is outside of your control and totally outside the control of the market.

The market would support that higher and best use value if the community had not stepped in. The park is still run down and one way or another the tenants will still have to move so no one won. Personally I believe that the community lost a good source of jobs that this part of town needed and since the wal-mart is now farther away, the folks will only have farther to drive for employment (but I digress).

My long point here is that it is important to truly understand how parks are valued and to make improvements to them so as to maximize that value.

I would also personally stress that I also disagree with you that buying a park to sell asap is a short sited, speculative approach. I do agree that parks can be a lot of work (which is one reason I do not see a turn around park as being a short term flip).

If we can buy a park with the potential for land appreciation to exceed its income analysis value then great but I suspect these are the exception and not the norm.

I would also hesitate to tell anyone to solely seek any such property (again, I personally do not like speculation so I am admittedly biased) because I find that sellers and their agents are keen on selling the potential of a property in lieu of a more accurate price that reflects the net income of the property.

Too often you hear them tell you how this property will be worth so very much more a few years down the road. They then want to charge you a premium for this possibility. For the speculator who falls for this, life will be miserable until and unless this land does reach and higher and best use value. Until then they have a run down park that will not cash flow (because they paid too much) and will require a lot of energy and resoures as you said, that much I will agree on.

But it sounds to me like your research has been limited to speculation and not investment.

Tony


#4

Rich,

Garry makes some valid points if your goal is a land play. However, a land play is just one of several ways to make money in this business. There is absolutely nothing wrong in buying an older park (IF THE INFRASTRUCTURE IS GOOD) and simply leasing the lots until hell freezes over. These places can be the closest thing to a never-ending slot machine that you will ever find. And the management of them is simply not much once you get them running the way you like. Doesn’t matter if the homes are older or the people are not wealthy. People’s lifestyles are not your concern as long as they conduct themselves well and pay on time.

You asked what to look for so let me offer some things to think about. Don’t even think about buying something until you learn a lot more than you now know. It may take you many months but the time spent learning the business now will save you $$ and grief later.

IMHO infrastructure is key. This can kill you. Water and sewer lines, electrical, roads, gas lines, size of lots, spaces per acre, etc. There is so much to go over that it would be impossible to list everything here. I lost $200K on a park due to infrastructure. Read about Corey’s on-going misadventures in Texas. You simply must become something of an expert in the above items to avoid similar fates. Get to a boot camp ASAP and read the archives of this forum. Attend MHM in the spring along with at least one MOM. Look at tons of parks and then post your questions here regarding stuff you do not understand. Be prepared to spend more than a few bucks on airfare (Southwest has the best frequent flyer program) to actually visit potential purchases.

Get outside help and be prepared to pay for it. Money spent on expert advice is never wasted.

NEVER TRUST SELLERS OR REALTORS OR MANAGERS. Is that clear enough?

I’m trying to tell you to slow down and take baby steps before continuing. Maybe you should do a Lonnie deal or two as you will learn tons of useful stuff that will prove invaluable when you go to to buy. Deals are everywhere so there is no need to rush into this business. I am not trying to discourage you as this can be a great business. My one 42 space community(I have a waiting list for every space I am upgrading) will pay for my retirement. I’m now getting leads on other deals in my area (economically depressed and filled with run down communities) that can, with proper management, make it so I never have to work another day in my life.

Hmm. My flying fingers are getting sore and Purpy the cat want his breakfast so that’s all for now. Read the archives and post specific questions and I’ll do my best to help. Don’t get discouraged and you will do fine no matter what type of long-term business model you choose.

Rolf


#5

Rich, since there are no bootcamps on the near horizon, I would recomend the bootcamp in a box, I think it is available on this site.


#6

Tony and guys, you guys are the one out of 20 who can make it work. I agree that some of you guys can turn a profit and do great. you are the exception. I know from life experience that most people do not do DD and as some one wrote they get sold on potential. Looking in my area in a semi serious way I see that a “moderate” well kept mobile park with good infrastructure is expensive. I agree with you on a turn a round if you have the capital and ability to improve and manage. I cetainly appreciate the ones here who take the bull by the horn and it is the best of small and big business ventures. Just know what you are getting into, try land home package like you do Tony and know the business. I know it is not for me at this stage of life, I do feel that it can be a winner if like you state you are an investor with a game plan and not a spectulator, looking for long term value with lots of sweat equity (which is a good thing). Honestly, I have made a lot of money doing what others would not do or want to take a chance on, so I am all for the small business man , guys like you. As someone told me once , if it was easy everyone would do it. So true in life and business. You guys have given good advice and learning is the first step. I like checking this board once in a while because of the good common sense advice and helping attitude . So be careful and wish you all the best in your business. The regulars here are the experts certainly not me in this field , just my inexperienced opiiniion


#7

Tony, you are so right. We are watching fellow “investors” from Florida fall on a daily basis. They bought SFH with 100% financing, interest-only variable rate mortgages because they were into the “get rich quick” game. We know of several who are now facing foreclosure on not just one, but many properties. We had no idea that so many people were stacking their cards, ready for a fall.

The speculators have caused the rental market, as well as the home sale market, to go sideways. In an effort to get at least PART of their mortgage payment, they started renting homes for far below market. This has caused those of us who own homes bought and mortgaged the tried and true way to rent our properties at less than monthly cost. Owners of rental houses are complaining that their tenants are wanting everything because of at least the perceived idea that they can get it elsewhere. We actually just invited one of our Florida tenants to go ahead and break their lease because they have not paid ONE payment on time, with notes that say “that is how it goes” along with telling us that they could rent a bigger, newer house than they are renting from us (about 2,000 sq ft) for less money!

We are about to get a property manager for our Florida properties, because we just can’t travel a minimum of 7 1/2 hours to hand out 3-day notices and other related items. It is extremely difficult to landlord from a distance!

In the meantime, we are growing our park - getting rid of problem tenants, adding new ones that want to live in the nicer place it is becoming, and bringing in homes to fill the empty lots. (We have sold every house that you saw during MOM - even the model - which of course, no longer looks or smells as it did!)

It was a fluke that we moved into the mobile home arena. Like most others, we either bought houses to hold or houses to fix and flip. When Jim found mobile homes there was no looking back! That is not to say that we have never done another SFH - we have - or that we will never do another one. Any good investment that comes our way is fair game if it interests us! However, it was clear to him from that point that our future lay with the wobbly boxes, and the Florida market has more than proved him right.

Meeting Lonnie, Ernest Tew, and Steve Case were some of the most productive times of our lives. Spending time with others in this arena - Greg Meade, Steve Wiltz, Fred Balke, Daphne Lowe, Anne Gerber, Lin Bennet, Tye and yourself as well as others has been priceless! Our only regret? We are not 20 years younger and doing this!