I’ve been reading about mobile homes for a while now, first looking at Lonnie Deals and then finding out about buying parks through the recent news articles and this website. I’m close to being ready to jump in, but I’m still on the fence and just need a little nudge. Can anyone help me with my concerns here?1. My biggest worry is that the field is crowded. The boot camp takes 50 people at a time and has been running pretty regularly for the past couple of years. So there’s potentially a thousand or two thousand people just off of this site alone who are looking for deals. I understand that the big private equity firms aren’t in this market (at least, apart from the high-end seniors-only parks), but I feel like if I go onto Loopnet or Craigslst, by the time I look at a park there will have already been 10 people looking at it, and if it’s a buy it will already have been bought, but if it’s still on the market then nobody else wants it. Am I wrong to think that between Frank, Dave, Jefferson, and a few others, they’ve got a pretty good lock on the market, and what they miss will be bought up by a big group of other people, leaving the scraps to people like me? (That’s how it works in the finance world… market efficiency.)2. I don’t really see a lot in the forums or the website’s articles talking about the risks involved. Sure, there are some headaches with problem tenants, but doesn’t anybody lose money in this game? A few people mentioned concealed-carry licenses… these parks as an asset class are likely very illiquid, must be very hard to sell once you’re done raising the rents and dropping your expenses.3. I still can’t figure out why there are so many helpful people here on this board, and why Frank and Dave are doing their courses. Wouldn’t it be more profitable for them to focus their time and energy on getting more deals? (Okay, maybe I’m looking a gift horse in the mouth here–the contributions on this board are awesome and I can take comfort in the level of support I’ll get if I jump in.)4. 50 people per bootcamp, held regularly for the past couple of years… did all those people who took the bootcamp succeed and become multimillionaires, or did most of them fail/quit? Why did they fail, when all of the promotional materials make it look so easy?All that having been said… I think this would be a blast. It looks incredibly interesting, and I can see how, done right, it can be lucrative. I don’t have a real estate background so rehabbing is a bit foreign to me, but I do have a strong finance and tax/accounting background, so all of the legal entities and tax issues and depreciation and financial engineering and alternative investing ideas make perfect sense to me.Background on me: I’ve got about $50,000-$75,000 of my own money to invest in this and can line up another $50,000-75,000 in additional funding. I’ve got a job right now in offshore finance in the Cayman Islands but I’ve been looking to come back to America at some point. I’m at the point now I want to be self-employed… getting an income off of a park and freelancing on the side could work well for me.I’d be very interested to hear what any of you have to say. Thanks!
I can only speak for myself- I post on the forum because I was helped into the business, and I enjoy helping others. I have always found if I am transparent and helpful, somehow that opens huge doors on the other side- and I am lifted. bootcamps- now this is a guess. I would say most people that take the bootcamp do not end up owning a MHP solo. They might partner, or buy into a fund, but I think the percentage that own one outright is pretty low. The people with the skill sets to put it all together make it look easy, but so do the piano players at concerts. Parks have a lot of moving parts, and the fact is, not everyone is comfortable with that fact. Also- distance is a huge barrier. Most people have a hard time owning something out of state- so they only invest in local assets. That leaves lots, and lots of parks open for the people that can play out of their backyards. I hope that helps…
We have had about 700 people go through the Boot Camp since inception. We used to only do it a few times a year, and the number of people was lower. Of the group that goes to Boot Camp, about a third already own a park and just want ideas to improve their profitability. Another third, after pondering how the business works, decide they don’t really like it, or would rather invest in it passively. The final third actually hit the listings and start making offers. So we’ve basically got 250 people out there buying who went to boot camp – that’s not many at all, given the fact that there are around 50,000 mobile home parks in the U.S.Since inception, Dave and I have written and taught about the business strictly as a hobby. That’s why our stuff is unusually honest – because our day job is owning parks and we don’t worry about what people think of our output, as long as it’s 100% fact. We had already owned parks for almost a decade and a half when we wrote our first book, so we never really saw ourselves as teachers but as mobile home park owners who had a hobby writing and talking about what we did. We own 100 parks (10,000 lots in 16 states which is the 15th largest portfolio in the U.S.) – so it’s not like we’ve missed out on anything by having fun with our hobby. I guess we could have played golf instead, but we both live in small towns where golf is not really what people do.The REITs and private equity groups are not looking at buying the same product that you are. They want “finished goods” and are willing to pay top dollar for them. They also want giant properties that can handle a lot of administrative expense. This is not the business model that we would ever recommend, nor is it what we have any interest in doing ourselves. They are absolutely no competition to you, unless you are looking at buying $6 million parks at 7 caps. Case in point, The Carlyle Group (the big news story of 2013) entered the business paying $30 million for two parks with little upside in Florida. Is that something you would have wanted to buy?The mobile home park business is an equal opportunity industry – everyone has an equal opportunity to do well or to do nothing, completely at their option. We don’t bug people unless they tell us what they’re doing, but there have been a ton of people who have bought parks after going to Boot Camp and we’ve done interviews with some of them (Howard, Stathis, etc.) that you can listen to. We will be doing more of those in the near future, as we think that’s a great way to learn about what other people are doing.There are a ton of people who have lost money in mobile home parks. We buy REO deals all the time. The #1 reason for failure is “capping” the rental home income. The #2 reason is failure to do proper due diligence, and getting crushed by lack of permits, failed private utilities, markets that have zero demand, and other factors that could have been easily identified and avoided in diligence. I gave a lecture on our Top 10 Worst Deals, and you can still listen to the recording (it was about 6 months ago). Our worst deals resulted in almost no loss, because we buy things cheap and do good diligence, so we can survive worst case scenarios. But in any business there are going to be successes and failures, and we believe that, as Ben Franklin said, “diligence is the mother of good luck”.Mobile home parks work well as a side business, as they don’t require much time (maybe 5 hours per week) and you can spend time on them strictly on nights and weekends. But you have to buy the right park to do that. If you buy the wrong park, you could spend 60 hours a week there and still fail. Again, it all ties back to the quality of your diligence and your knowledge of the drivers to profitability.
There are still deals out there. I would not be too worried about ‘all’ the people that have gone through bootcamp. Probably many do not end up buying parks. If you prospect and network, you are likely to find a deal to buy. The rate-limiting step in this business is time. You’ll get very busy quickly with your park(s). Even Frank & Dave don’t have all the time in the world to buy every good deal. A few will slip by and fall in your lap. ;)Go for it,-jl-
The 3 parks I currently own were each listed through a broker and marketed on MHPS. So they were out there for all investors to see. I think the one thing I did right was moved fast, made the offer and got under contract. I knew they were properties that fit my buying criteria and so I worked fast and was first to the negotiating table.
Learn as much about the business as you can (I’m still learning). Go search out some deals and analyze them - get the marketing package, sift through the rent rolls, P&L’s, etc. Check out the market where the park is located. Practice analyzing some deals and you will get better and better at it. Then when the right deal shows up, you will know its something to go after.
Regarding bootcamp attendees, you have to remember how much work it is just to FIND a good deal. Although as Frank said, there are a large number of parks relative to buyers, the number of parks pales in comparison to other types of property available. This isn’t like buying a local SFH for some flip; those are all over most major cities and not hard to find at all. This is a specific niche in which you will be spending six or seven figures for a very specific type of property. It’s not likely for something like that to just fall in your lap like it could with a local duplex or something along those lines. It takes persistent, hard work and sometimes some outside the box thinking to find a deal worth pursuing. These days people seem to prefer instant gratification; mhp’s definitely do not fit into that category. How many people are going to be relentless in their search, dedicating time and other resources, even though they still might come up empty in the end? If their early attempts are unsuccessful, how long will they keep looking? It’s easy to get discouraged when you aren’t seeing tangible results.
Thank you, everybody, for your very insightful and encouraging yet sober comments. What you all say makes a lot of sense, and allays a good chunk of my worry. I’ll try out the self-study course and see if that gets rid of the rest of my worry. The discussions of the numbers of potential investors out there makes a lot of sense. I really like how it seems like there’s something for everyone in this business, and I’ll be able to use my strengths are different from the next guy’s… I can see how geography, resources (both assets and competencies), and what you want to get out of this can be so different that, with enough hard work, the right park can be bought.
Ive been to two bootcamps, the first to learn the business and the second on how to improve running the park. From speaking to other attendees while their, a good % get discouraged after physically being in a park we tour (most had never been in a park) and cant imagine owning something like that. Then Franks hilarious mobile home park stories drive home the point that this is a different asset class. Finally, a lot of investors cant grasp the fact of owning an investment hundreds if not thousands of miles from where you live. The people who are in this business are some of the most down to earth friendly people I have ever known. Sharing stories and advice seems to come with being in this asset class. I now own 6 parks and the cash flows are fantastic. But, it didnt come without a whole lot of work and travel to get them where they are. Now stabilized, they are a part time job at best.
Thanks to everybody again for the comments. I’m making my way through the first part of the home study course and have put out feelers on a couple of parks, and… this stuff’s absolutely fascinating. So many moving parts just on the financial side alone, lots and lots to research, interesting little tidbits popping up constantly about the parts of the country I’m looking at… I’m working my way now through the learning process, doing lots of dry-runs with calculations and research, talking to as many brokers and selling owners as I can.The finance side is right up my alley. But probably the one thing bothering me right now is the operational side. The whole premise of this game seems to be that the parks are mismanaged, so go in and stabilize them and you’ll be successful. Sure, I can read through all of the excellent material, get advice on this excellent message board, do bootcamp, but at the end of the day it’s me, finance and tax guy with zero experience managing from a distance, thinking I can do a better job operationally than someone who’s been managing his own park on-site ever since he started it in the 70s…
I attended the bootcamp several years ago and use the lists given to us to contact sellers. I pick an area near another park I have and then ride around. If I like them I send a letter I am interested in buying from them. In some instances they want to sell but not sure of the price. A chance to explain the magic formulasThis is the best method as the park listing has snot been available for everyone to see or taken right away before its even posted.The response for every 20 I send out is about 2 or 3 calls. But even if they are not interested to sell now, they keep me in mind in the future
I think you overestimate the benefit living on-site has on management and operations as well as the capabilities of the owner/manager in the first place.Yes, this guy might have been managing it on-site from the beginning. But you know what that means? He’s always been around the tenants. He’s probably even friends with a chunk of them. It’s not easy to maximize the efficiency of a park when raising the rents or passing certain expenses onto tenants may make it harder for your own friends to live there. Also remember that if he built it in the 70s, he likely does not have any sort of mortgage left meaning he has more money left over after expenses anyway. That would make it even harder to maximize efficiency - he’s already making a decent profit and probably doesn’t live a lavish lifestyle if he’s living in a park…so why change? Why make it harder for those living around him, most of whom he’s known for awhile, to still live there? Is he going to enforce a ‘no pay no stay’ policy with collections and go evict his neighbor because they cannot pay? Living there himself gives him the perception that it is more of a community than a business.Actually, I attended the bootcamp a few months ago but had to leave early (which was a poor decision!). This was a concern, but Frank even said they structure the bootcamps so that the most valuable information comes first, while the stuff that’s easiest to grasp comes towards the end with people leaving early due to flights. Want to take a guess at what’s towards the end? Operations and hiring managers. Finally, take a look at none other than Frank and Dave. Buying parks out of state that have been mismanaged is their specialty! If all these owners living on site and managing the parks themselves were competent and knew what they were doing, I don’t think F&D would’ve bought however many dozen parks they’ve purchased in the past few years because the financial incentive wouldn’t exist.
The concepts are starting to come together for me–at least as far as initial research is concerned. An example:MHPS had an ad for an urban park in Memphis. $505,000, 23 lots rented out of 40 total lots, no POH, specifically says that the current owners have been neglecting the property. Ability to cut costs by metering the water. Seller financed. $275/month lot rent gets to a 9 cap based on their NOI.Started up my research. Register of deeds shows some sort of weird lien on the property by the lender after suing the owner and/or his LLC. Almost 100% of the lot is in a 500-year flood plane, and from what I understand the main problem with that is that it’d be hard to sell the park later on. $275/month looks about right for the area based on other ads. Memphis has some big employers (like FedEx) so the job market isn’t too too bad. Neighborhood isn’t the best, surrounded by junkyards of all things.Income statement needed deductions for a manager, cost of trash collection, and a flood insurance policy (I asked an agent for a quote–hope to hear in a few days). Between the stated fixer-upper status and the flood plane I priced in a 12 cap. (Should the cap go even higher given the circumstances?)I went through my thinking with the real estate agent–I like the park but the valuation is way out of whack. Came to my final numbers and she said it sounded about right, that’s roughly what someone had just put in an offer for which was then countered.So I’m feeling more confident about this now. Deals like this exist and, managed appropriately (to deal with stuff like the flood plane), could be worthwhile.kg2, what you say makes a ton of sense… I’ll feel better once I learn more about all the stuff that involves getting my hands dirty.
how did you solve the issue?