Am I unrealistic?


#1

After returning from a totally wasted trip to Texas (liked Texas but hated the parks) to look at some parks, I am now asking myself the above question. I owned a park before and was totally done in by the utilities. There was simply no way to fix them without emptying the place and re-designing it. Now I am hyper-sensitive to the condition of the infrastructure.

This is what I look at when considering a park and am having a hard time finding such a place:

No well or septic/lagoon systems. Not in a flood zone. A clear Phase 1 report.

15 up to 60 spaces.

Sewer lines made of schedule 40 ABS or PVC. The thick-walled black or white pipe for all you non-technical types out there:-)

Water lines of schedule 40 PVC.

Spaces big enough to handle 16 x 80s. Reasonably decent layout of the place.

Within commuting distance of a variety of employers. Nothing too rural.

A price that is not outrageous. I am from CA and I expect to get gouged at least a little.

Nothing east of Indiana.

Everything else can be OK depending on the price and terms.

Seriously, is this too much to ask? Do I need to accept old sewer/water lines knowing it will cost a fortune at some point to replace them? I always get the same response when talking to someone about 50 year old clay and galvanized pipe: “Well, it works for me.”

I would really like to get your opinions on this. Especially from those who have bought or managed older and smaller places.

Thanks.


#2

Rolf,

I don’t think you are asking too much! You are definitely clear on what you want. Outstanding!

It is very easy to buy just any MHP off Loopnet.com or by a broker. The best deals are found with perserverance, networking, and a little luck. Now that you have identified what you want it will happen (it might just take a little time!)

Corey


#3

I’m not sure of your criteria for wanting to stay west of IN, but if it is solely distance, consider re-evaluating. I have invested as far as 3,000 miles away, but what I look at is proximity to major airports, especially hubs. If you are in CA, it might be cheaper & faster for you to fly to DC or GA than So. Dakota. I am particularly sensitive to this because I can fly from coast to coast cheaper than from one side of NC to the other.

Tye


#4

Tye,

You raise a good point. I guess my answer to it is a matter of personal comfort level. I am really not familiar with the US east of the Mississippi and am simply more comfortable at this time dealing with property in the western US. I understand the economy, weather, building materials and codes, etc. I will probably buy a place in Texas and move there to manage it. As I get more familiar with other parts of the country, I’m sure my horizons will expand.

I agree completely with you regarding finding a place close to a major hub airport. If Southwest or American doesn’t get me real close, the place is probably not worth considering.

Rolf


#5

Rolf

I have to agree with you about how difficult it is to find a park. I feel like I am wasting alot of time here in Virginia looking for the ideal park. Spending hours on Loopnet & scouring the classifieds in Sunday papers from different cities, then driving 5 hrs to look at a park to find out it’s not what was advertised, getting harassed by agents and lied to by owners looking for someone worse at investing than they are so they can get rich quick or get out of a property they themselves should not have bought in the first place.

How can I find a park on city water and sewer that is a turnkey park with 80% occupancy priced at a 10-12% cap rate when the ones for sale are priced at 7% cap?

I believe that mobile home parks are a good investment but it really seems impossible to find one that fits the criteria recommended at the prices suggested.

charles


#6

Charles,

Couldn’t agree with you more. Especially that part about traveling to a site and finding out it is a piece of c—!!!

Let me add one more to your list of woes that I think is not given enough consideration (Steve and Corey listen up): At no time have I heard or read about how old infrastructure can impact a smaller and older park. Many of us can only afford these types of communities yet in many cases there is simply not enough income produced nor is there the physical space to bring sewer, water, gas, and electrical up to code when they inevitably fail. I think this is a big reason these places are for sale in the first place. Cities know this and use the permitting process as a way to reduce density (your income) or maybe even get rid of places they do not like. Sure, cities will allow you to upgrade an old and small place, but only if you bring things like density and home setbacks up to current standards. Having personally gone through this and been recently told this several times in various municipalities, it would be nice if MHU would start seriously addressing this issue.

This is the conclusion I have come to, Charles, and it may interest you. I am looking at a small place close to Austin. The city is great, location/neighborhood is superb, price is not as bad as others, and park layout is pretty good. While I cannot expand the park, there is the opportunity to do a couple of “Lonnie deal” and move in a 40’ shipping container cut into mini-storage rooms. The problem is the water system has failed and the sewer is not far behind. An engineer has checked it out and says there is enough room to easily bring things up to code and then the place will be great for the 20 year timeframe I have in mind. And that is precisly the length of time I believe it will take for me to recoup the cost of these upgrades.

I have simply resigned myself to the fact that, at my price range, I am probably only going to get “dogmeat” and the trick is to find the park that stinks less than others. What a criterion for buying a park!!!

FYI: As long as there is sufficient room on a site to ensure separation requirements vis-a-vis the sewer(THIS IS A HUGE POTENTIAL PROBLEM WITH SMALL PARKS SO PROCEED WITH CAUTION), putting in a top notch potable water system and landscape irrigation system is something a DIY person can do. There are a few things to know but you can do as good a job as a plumber and for a fraction of the cost.

It really seems the only way for small investors such as Charles and I to get into this business is to lower our expecatations, stretch out our investment time frame, and get a hell of a lot smarter/ more cognizant ON OUR OWN of the potential monsters that can bite us in the behind if we’re not careful.

Anybody care to respond to this?

Rolf


#7

Rolf

I think the answers to both of our questions are simple. We are both frustrated that we can’t find the good mobile home parks. Yet we know they are out there. I see people on this forum plucking mobile home park jewels out of what seems like thin air. I hear stories of people getting rich overnight with that amazing deal they found. But who is doing this? Who are these people?

I realize these are people just like you and me. The difference is they are pursuing their dream with all the obsessiveness needed to make it happen. These are not people sitting behind a computer writing a few e-mails or waiting for agents to bring deals to them. They are out there- driving to parks, knocking on doors, calling people, networking, etc.

One truth about investing is that nobody is going to give you anything for free - not agents - not sellers - not anybody. We can’t expect to answer a Loopnet ad (or whatever) and say to the sellers agent “I’ll buy your park for 600k instead of the 1.2 million you’re asking because that’s all its worth to me” and for the agent to say OK, you win you can have it for 600k. But maybe if we ask 50 agents and sellers we’ll find one who will.

So I’m sitting back this weekend re-evaluating my property search methods and strengthening my resolve to achieve my investing goals. I’m going to try to call twice as many newspaper ads. I’m going to drive out to parks in my area and harass (well speak to) tenants to find the manager and owner to solicit them about selling their park directly rather than waiting for them to decide to sell.

I believe you are correct about being picky when selecting a park. Avoid all the negatives you can such as wells and septic tanks, large numbers of deadbeat tenants, parks with bad reputations. And don’t pay too much. You know if you give in and try to take short cuts you will pay dearly.

Lets strengthen our resolves, re-double our efforts, keep the faith and stay smart. Good investing fortune happens to people who are out there looking for it. And I’ll guarantee that the people finding the good parks are looking hard - they are just doing it better than we are.

charles


#8

Post Edited (04-15-11 11:07)


#9

Charles,

What a great attitude!! We are all looking for that “PARK” I am sure they are out there.Its funny just today I printed out all of the parks in my state,Wisconsin , went to most of the city assesors sites to research the owners and start contacting them about possible sales.I just returned from a park in N.E Indiana, numbers looked good (as usual) park pictures (not bad) park visit (NIGHTMARE).I will say this about our industry though,what a great group of individuals.We all seem to have each others back ,its refreshing.Good luck hunting.

Bruce J.


#10

Bruce,

How did you look up owners names for parks in your area? I’d like to do the same but for my area’s surrounding counties you have to go in person to the tax assessment office and type in an address into their system.

charles


#11

I’m not looking for another park yet, but I’ve given some thought to how I will go about searching for one when the time comes. I’m gonna do it Lonnie style- that is drive the speedbumps. I’ll personally visit all the MHPs in the area that at least on first glance meet my investment criteria, and chat with the PM/owner. I’ll leave a card and plant the seed of what may eventually lead to a sell (or possible referral to another MHP that may be for sale). Networking is sometimes time consuming, but its always invaluable.

Daphne


#12

Hey Charles,

In most cases in Wisconsin you can Google the city and get to the assesors site, input the address of the park or the parcel Id. # and the information usually is available( not in all cases though) I’ll tell you what else is pretty cool,the Google Earth site. You can punch in the address to the park and get a nice look at the surrounding area within about 5 seconds.

Happy hunting, Have a great week!!

Bruce J.


#13

Daphne,

Sounds like a good plan as long as you are in an area with lots of parks. My question to you is how do you value the park when you make an offer?

Rolf


#14

Rolf and Charles

I am one of those people out there who devoted 110% to finding a MHP. I traveled to several states with not always the best results, but I never gave up. It only took 10 months to find the deal that met my business model, which was taken from Corey & Steve and others that have been keynote speakers at MHM and the bootcamp. I met several lets say not so knowledgable brokers and about the same amount of owners that only disclose information if you ask. I am a broker and cant fathom not knowing more about the business if I am going to be selling MHPs. I can tell you the asking price means nothing if you are a prepared buyer. You need to know more about the mobile home park business in the area you are buying in than the broker (not hard to do) & seller. I bought a 149 space park with a new infrastructure (2002) that was on the market for $1.2 mil. I paid $700K or $500.K less than asking and knowledge is what got the deal. If this was easy everybody would be doing it. But that is the beauty of it all. Rick Ewens


#15

Holy crap Rick - 149 spaces for 700k!! Thanks for making me feel even worse.

Seriously - that’s fantastic. You obviously made this happen - it didn’t just happen to you. You educated yourself, set goals and perservered. This tremendous good luck found you because you were looking for it. Now will you please not buy any other parks for awhile so I have a chance. - charles


#16

Rolf, I look for MHPs that have low occupancy due to some correctable problem. The 60 rule that Steve uses is a good first approximation of value. Ideally, no one wants to pay for potential income, but value is influenced by a lot of things including its specific location (ie. waterfront, downtown, rural), comps and your exit strategy. My suggestion is run the numbers (purchase price, cost of any necessary improvements, cost of bringing in homes if applicable, etc.) and figure out the total capital requirements, estimate the value upon completion, and then assess whether its worth your while.

Daphne


#17

Wil,

Did you check out MHP.info

Bruce J.


#18

May I ask which park in Texas you looked into? What was the cause of your disappointment? I am still fairly new at this and would like to learn from someone who has been there and done that.

Appreciate your feedback. You could email me directly at rgunnoe@yahoo.com if you want to respond confidentially.


#19

Helen G.

I looked at a small mhc in Alvarado which is about 1 hour south of Fort Worth. I think it was called “Creekview” and that should have been a big red flag. I asked the seller about being in a flood zone and he assured me only a “tiny” part of it was and that unusable for homes. The place has some empty lots and he assured me the residents are long-term and wonderful people. The seller sends me what I later find out to be some pics with absolutely fantastic camera angles and things look OK. The numbers look good so off I go.

FYI: A park on LoopNet with no pics is a bad thing.

I drive up to this piece of dog meat and the first thing I notice it is next to and downslope of an old gas station. Hmmm, I think, given the lax environmental laws in TX, the Phase 1 people should have lots of fun. Then I see the homes are old and decrepid and not placed in any type of orderly layout. It is like a tornado picked them up and wherever they landed that became their address. Several of the homes are vacant (the park-owned ones as it turns out) and the others are just plain ugly. Dogs (emaciated and vicious) on long ropes everywhere just waiting for the opportunity to make a meal out of your lower leg. Then there is the babbling brook that runs right along the back of a number of homes. Not good. I called the seller in the morning and, lo and behold, now he tells me about 1/3 of the park is in a flood zone. No way in hell will I buy anything in any kind of flood zone. Oh, and did I mention the town itself? I have seen figures in a wax musuem with more life than this place.

Not having much to do the next day before my flight back, I drive down to Temple to check out another place. Older park but really lovely. BIG mature trees and in a great town and a location on top of hill to die for. In walking around, I notice water line repairs being done. Hmmmm, 1" schedule 40 pipe running just inches under the road with no sleeves. 26 units and they are using 1" pipe!!! Must be great in the morning when everyone is taking a shower. No problemo as I am a landscape contractor and it’s pretty easy to do a water system.

Things start to go south when I open a panel box to check amperage. An entire nest of the most unusual and largest wasps (killer bees???) flies out and attacks me. I probably set a new Olympic record for the 100 yard dash.

Nonetheless, I decide to pursue this place as I really like the area. To make a really long story short, it turns out the person who built this place installed a clay sewer line across 2 adjacent parcels to the closest manhole. Problem is he neglected to record an easement for access. Things are a little murky but it seems the owners of those parcels do not like the owner of the park. The city never even had platted the park so they made the new owner do it. As nonconforming as possible so,in exchange for being nice enough to allow the use. the owner had to give the city $38K so the city could fix its crumbling manhole/sewer connection. Great, I think, I can upgrade the sewer system at a reasonable cost. Wrong. Turns out the adjacent property owners will not give the owner an easement for access to his sewer line even though their properties are open fields. They cannot make him tear out his 50 year old clay sewer but they do not have to allow him to cross his land if it ever needs to be fixed and clay sewer pipes have an extremely limited life. Plus you cannot usually line them with a PE liner as the size is usually too small for modern codes. At this point, my offer is to either get a sewer manhole in front of the park or buy the adjacent lots or forget the whole thing.

All of the above I found out long distance on my own.

I hope you get a sense of just how badly you can get burned in this business. I owned a park in AZ a couple of years ago and had to give it back to the sellers. Turned out there was some outright fraud and non-disclosure and the place was close to be unihabitable. Infrastructure again. Contact me if you want some real horror stories. In my mind, infrastruture is key to the long-term success of a park and you must assume everyone is lying to you when they tell you they never have any problems. I still want to eventually own 2-3 parks and I believe in the business but caveat emptor should be permanently etched into your brain.

After a year of looking, I think I am onto something I really like. Horribly managed and failing but great infrastructure (200 amp pedestals, good roads, plastic sewer and water, city utilities) and layout. Lots of possibilities if managed correctly. Just sent in a letter of intent tonight. The sellers have 2 more parks in the area they royally screwed up and are desparate to sell them by the end of the year. Give me a yell and maybe one of the them can work for you.

Rolf

Post Edited (09-27-06 18:05)


#20

Rolf,

Please feel free to forward me information on those two parks. I would greatly appreciate it. It is so difficult to find a solid deal.

Thanks,

Nicole

nicoleevansemail@yahoo.com