Exit stratagies


#1

I hear a lot about these different ways to exit deals and would like to kick it around a little. My situation is I put together 11 L/H pacs this year and here it is october and I am sitting on 8 of 'em. The market for sale mobiles om land just DIED. Worked with Jim Yawn, and 4 other investors from this site (and MOM) and they are in the same boat.

When my partner and I started these, we figged we could sell all cash as we have 17 others…WRONG. Financing got stupid and insurance is State of Florida or none. Our fallback is sell on contract (triple net lease) or rent until things improve. I have 16 paying Notes and 4 rentals to fall back on and my biz partner has 18 rentals so we aren’t desperate to sale and refuse to short sale to get money. We had no hard money so this will work out for us, BUT…

What kind of exit strategy can you have when you have millions in a MHP, and things change as they have here. We have sold 58 homes off of our retail lot this year and only 4 I can recall have gone into Parks. The reason? Almost every Park in Florida is under the “highest and best use scenario” where they are shutting down right and left. Pinellas County is offering HUGE incentives to convert older MHP’s into affordable housing subdivisions (site built). I know that FL is a unique market, but what can a person do if they can NOT fill a Park that is almost empty? Folks are terrified of moving into communities and they shut down. I would like to kick this around a little. My buddy Pacman got me thinking about this a few months ago…Tampa / ST. Pete parks are not full and selling in them is very, very, tough. any way to overcome this?? Exit strats? Protections? know your market is great advise, but what happens when your market tilts? This is not a gloom and doom post, i plan to make large dough in this market but this is food for thought…

Regards,

Greg


#2

Greg

I agree with you that the market has changed. The market is correcting and the investor cash inflow has slowed. I think we all would be kidding ourselves if we thought that frenzied pace of home sales would or could continue forever.

The fact is and will remain that affordable housing is a very real scenario and that will remain your strength in your business.

Up until this last year the majority of my investments have been stick built single family homes and some commercial properties. Last year at MOM when we met I got a taste of the land home business and jumped in. From July thru now I have sold 7 L/H pacs and love it. I will be the first to admit the first 2 were like taking candy from a baby, cash buyers and fast closings. The rest were much more strategic in nature with more marketing involvement and traditional financed buyers.

We all know the saying “know your market” and that is never more true now. So far, you’ve had a great year, 58 homes…WOW! My question/s is of the 50 or so that went to private land are there any trends you can recognize? Is it price? Model? Availability? Age of home? etc. Let the facts and data be your guide.

What I’m driving at is every deal I sold this year was in direct relation to the wants and needs expressed by each prospective buyer. I quickly learned that the spec building though still viable ( and I have 2 in the works) is not (at least for me) the best business model in this environment. Shoving a square peg in a round hole doesn’t work so well any more when there are plenty of round ones laying available!

Does that help any? Drop me a line if you’d like to chat more.

Jeff


#3

In our particular market on the Space Coast we have few options as to where to put mobiles. As we have previously talked about, Greg, we cannot put a mobile on land in the entire city where we (I?) live - it is totally zoned against them. The EXCEPTION to this is an extremely nice 55+ gated community, which we took you through. We are currently finishing a land/home package in this community, and although taking an incredible amount of time to accomplish because of having to go through 2 permitting processes for each step (community and city) we hope to get it listed with a Realtor by early November and thus sell during the season we expected to sell in.

We must list this property with a Realtor because of the gated status. No one is allowed in without the proper sticker on a vehicle or a resident calling the gate to allow said person in. There are no “drive-by” lookers. The Realtor we will be working with on this recently told me that missing our October 1 target date was no big deal because things are selling so slowly. This is true of the stick-built communities too.

On the other hand, we got a home back in a family park and the phone was driving me crazy it rang so much. Unfortunately, the family park has deteriorated in quality since we first started doing business there, and the reputation is fast decreasing. The park rent is currently $324/month and the guy who actually bought this home told me he has already heard it is going up in January. There were many empty pads in this park, but they are bringing in nasty old units, placing and selling them. (And not with A/C!) During a drive-through of the park this past weekend, Jim and I saw numerous for sale signs in windows - many more than previously. We had already decided that we would not pick up any more units there, both because of the deteriorating quality of the park and because we are putting our money in our own park in Alabama.

I have also noticed that the lowest stick-builts in this area were about $150,000 but some are now listed at $129,000. Taxes are escalating quickly, especially if a property is not homesteaded. The snowbirds cannot pick up a property down here and pay less than they are up north as they used to be able to do. Insurance is out of sight. One of our insurance policies on a stick-built just increased by 47% from a year ago. The taxes on the same house went up 26%.

So, exit strategies? The mobiles in the family park are still moving, although we have re-written some of our contracts for longer terms and less payment. The ones in senior parks are (as always) sitting longer, but I am seeing increased interest as winter approaches. We, at least, can afford to pay some lot rent (free lot rent is unheard of here) until the one we have available re-sells. The land/home package is Roth money, and we will STILL make more than if it was in the stock market even if we sell lower than we planned. The only time I think someone is in trouble is if they are overextended. In this business you can’t afford to be in that spot or you will become a true motivated seller. That is the person we are looking for, not who we strive to be! I think if I was in your position, Greg, I would look at the lease/option strategy rather than a straight rental due to the fact that the people who own something, or perceive that they do, generally take better care of the home than someone who is in someone else’s house.


#4

Will probably triple net lease my four. This is money in the Bank, but we needed the funds to build four CB homes on lots we own. With the market correcting maybe this is a good thing.

The MHP biz in Florida is crazy. Parks aren’t selling on CAP rates but proforma “highest and best use” basis. Or as I call it “pie in the sky if everything goes perfectly” basis. Weird. My chances aof owning a turn around Park in FL is slim. I hear great things in AL, GA, and NC, and SC.

This business she is a changin’ LOL

Greg