I’m looking at a park that has 100% park owned homes and I was trying to figure out how much it’s worth to potentially tie it up and start due diligence. I know the formula: occupied lots x lot rent x 70 = approximate value… only problem is the guy only rents the mobile homes and said he doesn’t actually have a number he charges for lot rent. I plan on calling other parks in the area to try and get an idea of what the market lot rent would be to help me evaluate it, but my question is have any of you had this situation before? The park is in an area with very high demand and stays full. Also he is fetching a pretty penny for regular older homes $875 for 3/2’s and $750 for 2/2’s plus water and trash. Any advice is very much appreciated.
Once you determine the lot rents for the surrounding communities your best option is to establish your rents at the top of that market. Financing wise it is preferred that the lot rents be the greatest portion of the combined lot/home rental to insure you achieve the most favourable financing.
The home rent portion of the total rent will be difficult to finance.
Your best option will be to try to get seller financing otherwise the owner may not be able to find a willing buyer.
1 Like
Ok ya that is kind of what I had in mind. I have already established that they would consider doing a seller carry which is good. Super nice owner and looks like a well kept park (judging from Google maps) It’s not actually “for sale” on any Web sites or anything this was found by cold calling and he said he’s getting up in years (original builder/owner) and would consider it. Plus it’s a small distraction to his very successful main business and doesn’t sound like he is super active in finding a buyer or is in any financial trouble but just wants to get rid of the extra “headache”. After figuring out what the lot rents should be at, I will figure out an approximate value and if he insists the homes are worth money I may try to either ask he carry a second for the homes or just pay cash for them. What do you think? I plan on selling them off asap.
Seems like a very good plan.
This can be pain staking, but I would get the blue book values of the homes. From there see if you can make sense of selling them off to the residents through financing (probably 21st) and then charging the lot rents that are market level. It can help reduce vacancy and refurbs to the home.
Thanks Brandon. I’ve seen some of your responses on some of these posts and was actually hoping you would weigh in on mine as you seem knowledgeable on these subjects. Do you have any advice? This will be my first park. Thanks for any input!
Thanks! Ya I am probably not going to be too uptight on how much I sell them for. Any reasonable number to me just so I can get out from under them and out of the poh business would be ok. I just want to work my way towards just receiving lot rent as fast as possible.
Ok ya that is kind of what I had in mind. I have already established that they would consider doing a seller carry which is good. Super nice owner and looks like a well kept park (judging from Google maps) It’s not actually “for sale” on any Web sites or anything this was found by cold calling and he said he’s getting up in years (original builder/owner) and would consider it. Plus it’s a small distraction to his very successful main business and doesn’t sound like he is super active in finding a buyer or is in any financial trouble but just wants to get rid of the extra “headache”. After figuring out what the lot rents should be at, I will figure out an approximate value and if he insists the homes are worth money I may try to either ask he carry a second for the homes or just pay cash for them. What do you think? I plan on selling them off asap.
Be prepared for a large percentage of turnover. You will be getting a tenant base that all have a renter mentality, not a homeowner mentality. So its not as easy as just selling off the homes to the current tenants and thinking that they will start caring for the homes and keeping them nice. And when you get some of the homes back (through eviction or otherwise) its very likely most all of those homes are going to be in rough condition. Since this would be your first park purchase, I’d advise you to pass. An all rental park as your first experience in the business will be very difficult.
Robbie
Oh point taken. Ya, I’m apprehensive a little bit. The guy has owned it for a long long time and has just rented the homes which look like they’ve been pretty taken care of somewhat. It’s apparently worked for him even tho all I’ve been taught and researched is to have the tenants own the homes. I’m actually on my way now to meet with him and look at the park and try to find out as much as I can to make a decision to go forward or not.
There is probably some truth to Robbie’s advice, but you aren’t exactly talking about a trailer trash court in the South. Homes that are renting in the $800+ range are almost certainly going to be to a higher quality tenant than your traditional trailer park dwellers. I would definitely go after this deal, but making sure I had plenty of reserves to finance the turnovers because I do agree you will be taking some of them back.
Thanks Nate. Ya so I met with the owner today for a little bit and we talked a little bit about the park as well as made a few drive thru’s. (I live about 3 hours away.) It’s actually very well taken care of, better then expected. Yes it is in the south haha. I just can’t get over the fact that it stays absolutely full with those high of rents! I think a rent to own situation (as many as possible) resulting in the tenant only having to pay a lot rent (which would be fairly high I think but cheaper then what they are paying now) once it’s paid off may be a winning strategy, just not 100% sure. There have been a few good points brought to my attention in this post. Personally, if someone said hey your monthly bills could be $200-$300 cheaper once the home is paid for id be all over it. But that’s me
Yeah, Rob is correct. It takes longer than you think and you’ll have quite a bit of turnover. You have to do it a few at a time as you can’t evict half the park.