I am looking at a MHP that I can assume loan and owner will carry second on. It is very old, and small just over 2 acres and has 30 lots. All the homes came over on the Sante Maria with the Pilgrims.
The Lot Rents are lower than Parks around (I checked) and it includes the Utilities in the Rent, which others don’t (I checked even more). There are 5 Park Owned Homes and has dirt roads. It is on City Sewer and Water.
I see alot of potential, but also a long horizon from real profits.
How ugly do you buy? How many residents as a percentage (I am thinking 50%) on average leave after having to pay utilities?
3 years ago when I started to formulate a business purchase plan UGLY was a good thing as long as the infrastructure and the demographics were good. Ugly to me is potential upside. It is also an indication of poor management. I found many ugly parks and thought I could clean them up only to find out the local demographics and the underground infrastructure was not good. If I was you I would proceed with caution, because it sounds like the underground portion of this park could have some land mines. Keep in mind when you read a post from me that I focus on turn around parks. I like the potential for maximum value amplification and cash flow increase.
30 lots on 2 acres is DENSE. Replacing the homes will be a lot eater. May get 1 for 2 but more likley 1 for 2 1/2. Also Rick is right about infrastructure. Just this morning we got a call from the Village Clerk, letting us know that we must have a major water leak because the usage in our old 12 lot park was 80,000 gal. in the 20 days from when we closed on it!! It usually runs 20,000 gal. a month. OUCH. So hi ho hi ho it’s off to work we go with a shovel and a pick!
I forgot to mention, We raised everyones rent 25-30 and no one complained, they knew it was too low. You have to compare your rents to others apples to apples. If you are in the ballpark on rent/utilities and lets say you allow pets, this is the place to live for those people. At the lower end of the rent spectrum the choices are very very limited. So I would not worry about a mass exodus.
Biggest issue is what size homes will fit. We have found that anything smaller than 14x70 tends to attract itinerants & deadbeats, with 14x70 or larger 3BR selling faster and attracting better tenants. I am thoroughly uninterested in masses of 2BR 12x60’s & 10x50’s. I’m sure others differ & make money with those, fair 'nuff. If the homes are stacked in there, you will lose spaces in ratio described by Don. If your state has very strict MH Regs (like say, Ohio) or “grandfather” clauses are getting blown, or costs of reconfiguring are high (ripping out & replacing concrete, etc.), the costs may be prohibitive, and certainly would present a steep learning curve if you are on the new side.
My wife, partners and I recently purchased a 12 lot MHP and are in process of purchasing a second 48 lot MHP.
The 12 lot MHP has four homes on it. One we are evicting, one is being used for storage and will probably leave once we raise lot rents, the other two will remain.
The 48 lot MHP has 36 homes with 28 rented. Several homes will be torn down, several may leave once we raise the lot rents, the others will stay.
While both parks offer tremendous upside the paths we will travel to turn them around will be different. With the 12 lot we are basically starting with a blank sheet where no tenants need to be retrained, no tear downs, no renters to convert to buyers and NO CASH FLOW only expenses. With the 48 lot we will inherit years of poor management where the tenants must be retrained, some homes must be torn down, and many renters must be converted to buyers, however, we will have positive cash flow on day one (excluding turn around costs).
Beyond thorough due diligence, understand what’s required to turn the park around. There are various forms of ugly each with their own pros and cons. Weigh the pros and cons against your financial, time and personal expectations.
This is my first post on this forum, however, I have been reading diligently for several months. My wife and I have been doing (non-mobile) pre-foreclosure short sales in Columbus, Ohio for the past several years. It’s refreshing to see that information and support are given so freely here as our short sales market can be very cut throat. This is truly a community that cares. Thank you all!
We will continue to share, and look for solutions, on this forum as we turn around our parks.