I would agree with all of your bullet points. I’m know that I am on the list, because I get 6 to 8 letters a month telling me that people are ready to buy with cash, can close quickly, and “they realize that all properties are not perfect”. It seems that all of the letters were written by the same person, as they all say the same thing. Since my wife owns half of the LLC that owns our three parks, I guess that you could consider us a “Mom and Pop” operation. A few observations about the opportunity to find “good” deals.
Do you think that receiving all of the calls and letters asking me to buy my parks are lowering my expectations on what I could get for my parks if I decided to sell? You see, its a numbers game in reverse. With so many people contacting me, perhaps one would be willing to meet my “unrealistic” ask. Since I’m not really in the market to sell, if someone walks in with “stupid money”, I’d be foolish to not sell. But then what would I do with the cash?
Stop telling me that I am doing it wrong. I own the park and you don’t. I’ve had many lookers tell me that I’m not running the parks correctly. They tell me that they were told not to do the exact thing that I am doing. I set up my business plan long before I ever heard of Frank or Dave. I set up my business plan based on the concept of Lonnie Deals. Notice that I said “based on”, not copied word for word.
If you want to buy my park, reasonable price is based on what it is doing for me, not what you think that it can do for you. My parks are generating cash flows and returns based on my investment, not yours. How much cash would you have to give me to replace the cash flow that I an currently making? At 1% interest, it would take quite a bundle to just match what I am making now. Sure I would rather sit on the beach and clip coupons, but the interest rates of the 80’s are gone. You are trying to induce me to sell, the “reasonable price” just went up.
I think that Park owned homes are great. They generate a lot of income. Owning the homes , at least in the beginning , makes it easier to turn the park around. It is hard to get rid of old dilapidated homes that you do not own. If you own them, a 30 day notice to non-renew the lease is all that it takes to get rid of the old house. The new house is not only a potential “Lonnie Deal”, it quickly raises the perception of the park , which leads to increased rents across the board.
Many potential buyers have told me the the Park owned homes, even those that are currently under contract, are not worth anything. Maybe they are not worth a 5 cap on payments, but they are worth more than the replacement cost of the house. I’ve had people tell me that they want to buy my park, but not the POH’s. I say that is OK, but I’m going to move all of the homes to another park the week after closing. The buyer screams foul. He says that you can’t do that. He says “I can’t pay the bank without the rental income, and it may take me years to get back to 100% occupancy.” You see, you can’t have it both ways. If the houses are only worth replacement value, I’ll keep them and you can replace them. I think that there is value added to have a park 100% occupied and to be collecting payments on those houses every month. My reasonable price includes this value, even if you aren’t supposed to.
I own three parks in Colorado, the last one was purchased in November of 2018. I think that I got a smoking deal on it. There are still good values out there. It just takes a little creativity and perhaps a different point of view. But, that could be said for any investment plan. Those that follow the herd may make some money, but those who go out and take the risk, can win big or lose big. That is what make America great.