Long story - please advise


#1

Please poke holes in this.

Colleague approached me about this situation; he knows not much about MHs, but he knows me, so that gives him some kind of a position. Colleague has spoken to a fellow


#2

Steve, why the 1-2 yr renewable lease? I am no authority on long-term leases but don’t utilities and other entities lease their land for 99 yrs renewable? This makes the improvements more valuable as they can be sold with the new buyer having assurance of a lot of time left on the lease.

e.g tie up the property in a 15 or 20 yr renewable lease, get park up and running, enjoy cash flow for a while (5-7 yrs), sell park business to new buyer. This would require the lease to be transferable.

Steve


#3

Just a comment on the PR side. I would expect that you and the owner/developer would still face a lot of grief since the other park owners had to move their homes and now someone is again setting up the property as a mobile home park.

As for the short term (15 years) it would seem to me that you are putting a lot of money into a deal that will in 15 years take a lot of money, same PR problem to take down again.

I am more traditional (read boring I guess) as I want to get the deed and get everyone else out of the equation so my thoughts on the lease should be taken with this in mind. But here goes. For me a lease would be an inexpensive buy in to control a turnaround property I plan to flip or keep long term. This property has no long terms so there is no back end. You aren’t going to spend 5 years filling it and sell it to another investor because it all will have to come down a few years later. We all know that turn around parks take years to cash flow and a lot of cash and tremendous effort to get them operating at capacity. Since investors invest for cash flow and speculators invest for lump sums of cash, it would seem to me that the short term eliminates both of these exits.

If I were to put it into our 3 leg stool example (cash flow, access to lump sums of cash, increase in net worth) I find that the 15 year drop dead date eliminates 2 right off the bat (lump sums and net worth increase) leaving only a heck of a lot of cash and effort for what may be very little (and slow growing) cash flow that will also die in year 15.

Just my 2 cents. Again, this is not my niche market so my opinion is only an off the cuff one. Please take it as such.

Tony


#4

Steve,

I like it but I’m with Tony on securing a piece of the upside. Consider one addition to your proposal - I’d ask for 1/2 of the upside from the $13Million - seller keeps first 13M and you split 50/50 from there. If the Land simply keeps pace w/ inflation your looking at a 45%+ compounding, probably more, in the next 15 years - your 1/2 could bring a cool $3 million upside.

If the owner won’t share profits while you to do all the work and provide a nice cash flow to him via the lease then I’d go as long term as possible, maybe a 50+ year lease. Record it in Public Records and cloud his title - If he sells someone would have to buy your lease out in order to go highest and best use. You also get fee simple tax advantages to boot - including 1031 exchange and depreciation on the improvements.

If the seller is interested in any of the above and you want help I’ve done both of these before.

Karl


#5

tell you what else I like is a 15 year term. name one thing you own today, you owned 15 years ago…kids unfortunately don’t count.

My thought is make a buck buying and placing homes. make a buck servicing LD loans, make a buck selling homes in 15 years, and mainly make cash flow for 15 years. The scenario we discussed will give you 3000 per month for 15 years…huge money. say you get a 200 portion of lot rent which you estimate at 600 per month per unit. Say another 25% of LD income for servicing, say 50% of upside over 13M (thanks Karl).

I like it a lot. I liked it when I heard it yesterday…I am still combing CRE archives for master Lease.

Greg


#6

I went over to CRE and dug up a few posts where I used an Archive URL:

Which I know was a Cool Master Lease by John. Now it is linked to some dr. sharron…are the archives still out??

Greg


#7

Steve,

I like the idea of short term use for cashflow but from the sounds of this community I think selling the homes Lonnie style is going to be more of a long-term approach for the buyers. Will you still have interested buyers if you disclose the deveolpment of the land under their home in the future ? And if you don’t disclose will that give you a black eye if buyers find out you knew about the development ?

You may consider renting these homes IF there is a market for that direction and you can manage it. In my mind this is more of a short-term solution to a short-term problem. On the exit side negotiate with the owner/developer to pay all the expenses to have YOUR homes moved to YOUR lots of chioce. Then in about 5 years start looking for a park with 15 empty pads to develop. :slight_smile:

Just a thought,

Keith


#8

Hey Greg,

Not sure about the archives at cre. I know Terry had been doing some work on them. To be honest, as the moderator there I have no more behind the scenes authority or responsibility than any other person posting does. I do not even have, nor do I want to have, the ability to edit or delete posts. I mention this mostly because I do get a lot of emails from people who’s post get deleted or ask other website based questions.

Just a regular poster who got his picture put up really. Sorry I don’t know more about the archive issue though.

Tony