I am scheduled to go to the MHU in February 2017. However, an opportunity was brought to me that I thought was a good deal. So I took action, I bought the park.
I suspect @frankrolfe , as a student of yours you would have wanted me to ask you first if it was good vs after so you didnt have to back peddle me out of a mess. -----in advance Sorry!
It has no income today however I think (I may be completely wrong, as I dont know what I dont know) it has great potential. The terms in which we bought the land and the potential we believe it has, is what drove the decision.
It has 22 spaces with all city gas/water & electric hooked up.
After survey discovered additional expansion opportunity up to 39 spaces
6 homes left standing - all in really bad shape. We will demolish these
No other trailers on the land
Potential to develop an additional 17 spots. No utilities there yet
Purchase & Terms:
12k out of pocket to receive quit claim to property from brother #1
15K back taxes due by March 31, 2017. City is willing to waive some of these taxes
$5200 due to brother #2 by June 2017. He is financing the remaining $77000 @ 20 year amortization; due in 10; 1 time payment a year of $5200 @ 3%.
Demographics:
No metro area showing on bestplaces.
Closest MSA is Omaha NE (1 hour) & Sioux City Iowa (39 minutes)
Low unemployment rate in all locations including city park is located
House prices in area $79,000
3 bedroom rents = $750
2 large employers coming into the park city.
-2nd phase for 1 company. However, their people come in build and no other people are needed to run the location
- 2nd new company, will be moving people in to build & remain in town
Strategy:
Fill 22 spaces with Owner occupant homes
50% brand new 3 bed/2 bath 1400 square foot homes bought through us, as dealers
We tack on $20K to each home purchased through us
Local bank/provider has agreed to be mortgagor for good buyers
50% can be owner occupied brought in homes as long as it passes our criteria, & less than 5 years old
We will collect lot rent of $250-$300
Potential:
Expand to small 8 space area first
Expand to 11 space area second (as this requires a new road)
How bad did I screw up?
Just a few observations: 1) A quit claim deed is the least desirable form of title, and if you were to try to sell the property a Title Insurance company may not be able to help you. I would not invest a dime in this property until I got a better deed, at least a Deed without Warranty - it sounds like this may cost more if you just got something from Brother #1. 2) You didn’t state whether the property has conforming zoning versus grandfathered - if grandfathered you need to confirm that a sunset provision does not exist and / or has not been enforced, which would essentially render the land useless for MHP and revert to the conforming usage according to the city’s zoning map; 3) I operate in a couple small towns, one of which has 500 people and I am the only MHP game in town - but there is a city of 50K 10 minutes away (e.g. it has a great metro area). If you have not confirmed the demand for affordable housing you may have a lot more trouble filling lots than you expected. Typically a 3 bedroom home will rent for the same amount as a 2 bedroom apartment - in your case probably $600 per month, which is low but not a deal breaker (for me at least assuming demand is strong). 4) You will spend a lot of cash filling this up or leverage yourself a lot infilling; 5) Labor in small towns like this is painful to find good help. You have a smaller labor pool to choose from, and may need to get your hands dirty if you’re in a hurry to get homes on the market. I deal with this all the time where I am at, and it’s the biggest downside of where I operate. 6) What are you going to do differently that will get this park full? It’s empty for a reason, and that alone is a red flag. How do you know there isn’t something wrong with the infrastructure that caused the Park to be empty? Without a single home occupied it’s hard to know if anything is working. Your prospective tenants will ask these questions all the time and will be a big hurdle to getting your first 3-5 tenants onboard.
Everyone has their own risk tolerance that drives their investment decisions. Get clear title to the property and then make some decisions based on what you know now.
Let us know what happens. Good luck!
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Hi jhutson,
Nice to meet you. - You have some great points.
Thank you so much for taking your time & energy to respond. I appreciate your insight.
I do know the quit claim was the worse kind of deed. We did have everything done with 3 attorneys (ours, brother #1 and brother #2) It was also done with an Abstract Title and has already been recorded, so that’s a good start.
- The city is so very excited that we are bringing this mobile home park back to a mobile home park. Story is they put $175,000 into placing all those utilities in the park and had not been paid for them by having the park up and running. As brother #1 never did what he said he was going to do with the park.
They are practically begging us by wiping away taxes and have gone on site to ensure all the utilities that are there are working. Offered to fix them if we have any problems.
They also agreed, in writing, as soon as we got the property out of brother #1’s name and into ours, they would consider waiving some of the back taxes. And/or providing us a 5 year tax abatement.
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My partners in this deal own a MHP in the next town. Its bringing in $six figures gross a year. However, they own the trailers. Which they are getting $750 a month for their 3 bedrooms. Im excited to hear from you that being in a small town isnt a deal killer.
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I really do not want to own the trailers. I would much rather have people bring in their own or buy them through my partners, who are dealers and place them.
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I have heard from my partners the labor is a major issue. Because they have a park already they are bringing to the table their contacts & resources.
Heck, I specialize in Rent To Owns on my SFH real estate investing due to this issue. I dont want to have to deal with the crap my SFH colleagues deal with doing fix & flips.
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Strategy to fill the park will be what I learned right here on this forum from a post Frank did. Build the community on value vs price.
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I, my partners, the town hall and anyone you talk to indicates the reason the park is empty is because of brother #1. I better pray that is the case huh?..lol
I figure, for what we are spending for it and the terms in which we got it, if worse comes to worse there is a neighbor who made the brothers an offer and wanted it just for the 6.3 acres of land. Brother #2 refused the offer because he wanted it built to the MHP to make his deceased mom proud.
However, if I run into 10 brick walls I may have the choice to sell it to the neighbor.
I will keep you updated and let you know my trials and successes. Which Im sure I will have a bit of both.
Thanks again jhutson for your brainstorming. Will we have a chance to meet at the Boot Camp in February?
@cashbuyerofhomes , as per your post:
- “Horse Before the Cart - How bad Did I Screw Up”
First of all “Congratulations” on the purchase of your MHP!
Second of all I agree with @jhutson 's post.
Personally, I would be concerned about the following:
1.) No income today
2.) 6 Homes In Really Bad Shape
3.) No metro area
4.) 2 Large employers
Like @jhutson I would be concerned that the Mobile Home Park is:
- “…empty for a reason, and that alone is a red flag”.
On the positive:
1.) As per your post: "The city is so very excited that we are bringing this mobile home park back to a mobile home park."
2.) As per your post: "My partners in this deal own a MHP in the next town."
3.) As per your post: “…my partners, who are dealers…”
I would suggest getting an Official Letter from Zoning stating that your property is Zoned “Mobile Home Park” before the politicians and people in charge change at the City Level.
I wish you the very best!
Kristin,
Thank you so much for your response. All valid points and things to watch for.
We have a meeting with the City Board on Tuesday.
We will be asking them and the town for everything in writing.
I will keep you posted…
Any long term RV parks in the area? Found an empty park and flipped it to long term RV living. Flipped the utilities, nice used sheds on every space and left the spaces large. Better space rental, waiting list to get in and zero turnover. Just thinking…
Do I understand your plan is to jack up the price of the homes you sell $20k over what you paid for them?
If so, that does not sound realistic to me.
Hi Randy,
That is the thought of the mobile home dealers in the area. Im not sure Im comfortable at 20K bump up. However with the price of homes in the area it would allow people who can not afford those larger homes entry into a brand new mobile home.
Pre-lim numbers and assumptions look good. However, I will keep you posted on the actual vs projected.
Thats a great idea. This could possibley house the temporary people for the employers for long term RV living.
I know the partners just extending their park by 17 spaces to house RV’s (they are in the next town). This may also be an easier way to expand the space we discovered to get some income coming in.
Thanks for the brainstorming…
Please do keep us up dated. It would be a real game changer if you can sell them for even a fraction of that markup.