How do you compete with stupid money?


#1

So i have a 25 year old Nissan for sale. It’s worth about $500, but i am selling it for $2800 and I already have 3 offers in hand. How can i sell a $500 car for $2800 you ask? Because of it’s future potential. If you keep driving it for several years (and yes - it runs just fine) chances are that some one will rear-end you at least twice. At $1400 per repair you will net $2800 and you will still keep the Nissan. As simple as that!

Sounds absurd, right? But this is what i keep running into with many park owners (no offense to anyone).
Just got off the phone with a very nice guy who was justifying selling an older single wide for $20k. Because it already came back to him like 3 or 4 times and he made over 20k on it.

But the problem is not the owner - i would totally sell my Nissan for $2800 if i could. The problem is that all these sellers have buyer with crazy money that are willing to pay this much.

I don’t know what to make of it. Does everyone right now have loads of cash and want to be a real estate investor?


#2

It sure seems that way sometimes doesn’t it? I share your frustration @dimochik. I have spoken with several owners who are confident their parks are worth 2x what I consider them to be worth. One of them even claimed to have an offer for that amount already, and they may have that offer. I don’t know. From what I’ve seen of the broker listings and sales, I wouldn’t be surprised. There is a lot of money coming into the MHP space right now. Much of it from investors who are evidently happy with a 5-7% return on their money. I don’t know how to compete with that.

Anyone have any helpful comments or ideas on competing with these buyers?


#3

Should you compete with these buyers? Does getting leveraged for that return meet your investment and risk thresholds? :thinking: If I had a 1000 pad portfolio then I would adjust my approach - but I’m not there yet.

For now my money goes into other real estate development investments. That doesn’t mean there are not good deals out there, but we all agree they are harder to find than three years ago.


#4

Maybe try mailing campaign? I recently finished a six month campaign done by Jerry Pucket out of Texas. Mailed six times in six months to about 450 owners directly. Received over 30 calls directly from owners for off market deals. Granted some were duds, like “do you want to buy my park? It’s more like just a big field with 3 homes in it.” But had some decent ones come through to and currently have 2 under contract(was 3 but let the ugliest fish go). Just a thought


#5

@JBush, this is actually a lead from a direct mail :)… one of many.
99% of the listed deals are just laughable. I’d rather keep my money in a CD @ 2%


#6

The answer is patience. Don’t follow the crowd. It is difficult when you want something now. At some point in the future, you will have an opportunity to buy at a reasonable price. For now, stay prudent and alert for opportunities. They exist but take a little longer to find.


#7

Been 3 years have not bought a park–had a 1031 bought tillable farmland and received a 5 cap plus increase land value with no effort–check once a year at spring time, great. Buyers are chasing very questionable returns–park at Moorhaven, Fl. for example–6 , years ago was in foreclosure, 2 years ago was listing for $2,200,000 just recently listed for $3,000,000 and has a buyers for $2,700,000 and the best we would do was $2,500,000 because we saw the recent appraisal was for $2,350,000 and knew in the winter season there was no improvement in occupancy and thus the new appraisal would not change. The park is run down but was willing to spend another $200,000 to bring new life to a park with very small sites. If you are a seller and have a nice park at 8 cap I will purchase it and DD will take less than 5 days cash, period!! When a cap rate is less than 8 when the economy goes south (it will)–tenants without jobs cannot pay even if they have no place to go—think–if 1/3 of my residents could not pay rent could I as the owner make my payments–it has happened before–2008-2010!!!


#8

Hmmm, I smell 2006 all over again.

If this is so, and it looks like it is becoming the case more and more, don’t compete.

Sell out to them, watch them go down the tubes and buy back in later.

If the newest group of buyers are happy paying 5-7% CAPS, accommodate them and liquidate NOW.
Remember, the MHP asset class is not clipping coupons, this is work!
These newbies don’t know that – yet.

The same strategy save my bacon in Vegas in late 2005 and 2006.
I was easily able to sell my apartments, houses and condos and wait for the right time to buy back in.

It reminds me of an article from 2005 on Tom Barrack.
Think polo.

If you want the link, please let me know.

Reading the tea leaves is crucial to your success as an investor.

Mike


#9

@mhmike, i am not sure if it’s 2006 all over again, but it definitely looks overvalued.
I was also thinking of selling what i have and waiting for a dip to buy back. However, i don’t think the dip is going to be as dramatic as it was in 2006 (but it’s great that you were able to use that opportunity). And i am not looking forward to paying all those capital gains and loosing any income while i wait for the dip. But i am also not going to be falling into this hysteria and buy at 5% cap…
I like @ArchimedesGrp advice - patience and persistence will eventually pay off.


#10

Some insight, for the past ten years we have been bothered with people wanting to buy our properties or brokers pestering for a listing. The 20 years prior we NEVER had people calling or brokers cashing us for listings. We sought our brokers and waited usual + 6 months on 10 caps quality parks to sell. One of the great changes is this web site and pushing classes. Our first park of 225 sites we bought from word of mouth from a neighbor farmer and the deal was consummated with $5,000 down and a 2 years hands on experience from the owner. Hands on experience is really important from a successful operator that is willing to teach. Suggestion, those with very little money work at managing a park for a owner-operator that is looking at slowing down and try out the driver seat to see IF that is really what you would like to do. I can make great money selling drugs BUT that is a business I detest and actually owning and operating parks is different than syndication like Frank with the Elevation group. Flipping parks or assigning them seems to be the new thing but remember we are still dealing with humans that deserve the best world we can give them in our parks.


#11

Thank god someone said it. Looks like the tops blown off and everyone is back passing around the same stash from ‘04 to ‘06.

Two recent off market “deals of the century” we decided to pass on:

72 lot with 68 occupied at 580. Owner wants 5.5M. This is a B park at best with lots of older homes. City water and Sewer

97 lots with around 78 occupied with a mix of homes and RVs. Lot rents around 385. Well water and packaging plant. Owner wants 5.1M

Both owners insisting their parks support the value and have “multiple offers”.

I’d love to hear someone on here make an arguement for how these values are reasonable. Seriously. Please explain it to me. Maybe Warren Buffet mentions the term mobile home park in a recent speech or perhaps Trump is licensing a mobile home park in mid town manhattan at 1M a pad. Either way, this would be extremely credible.


#12

There is always a buyer somewhere. However, I always find it amusing how EVERY owner says they had offers for higher than what they are offering you but yet they still own the park.

I always love the proforma pricing the best but they can never tell me why aren’t they running the park based on the proforma.


#13

Well stated. Simple common sense thoughts and questions!