Park Owned Homes Strategy

After all this discussion, I will plan to do a combination of all of the options. I will buy some mobile homes on my own (new and used) and rent, rent credit program and sell as I can, do the CASH program. When the current RVs I have in the park move out for whatever reason, I will buy a mobile home to replace it with until the park is all mobile homes and fully occupied.

Great question, Carl. I thought the same, 7 1/2% ???

This is the first secret of the business
 Getting rid of the homes at a price that people can afford. They actually do cost something to maintain and most people can’t come up with $10,000 or even $4,000, try $1600 maybe. Someone has to finance the transfer of title over over time, and that someone is either you or someone else. Or you can run a rental operation. We do.

Repos happen. Abandons happen. Evictions+fire sales happen. You buy a park with POH. In all those cases, unless you want your park to deteriorate, you will have to step in, take title to the home, and spend money up front with the hope of recovering it over time, with a little bit of return if you’re lucky.

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Exactly. 21st Mortgage has very low cost of capital, the park owner is backstopping at no risk of default the resident’s income stream at a rate commensurate with elevated risk of default, what’s not to like?

Why do you keep asking that? A waiting list is a luxury that not all enjoy. When demand is through the roof potential vacancy doesn’t matter. With respect to RV’s versus MH, sometimes the problem is different licensing requirements.

The problem of what to do to provide adorable housing is not solved by “let them bring RV’s.” The problem is that code-compliant housing costs $20,000 per unit or more when you factor in site prep, and that’s a lot of money for most Americans to have on hand at once. But the economics of people seeking $20,000 houses don’t allow them to borrow money and in fact there’s a huge network of financial institutions that fee-them to desperate measures. So it is highly regulated how the government lets you bargain with future money obligations and housing that’s dependent on future monetary obligations. They call that interest and mortgages.

What do you do when the average monthly income of your tenant base is $1250 a month? Find another market? Sell to a “greater fool?”

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We much prefer mobile homes to rv’s but our market is moving to tiny homes and rv’s. In the last 3 months have bought 5 new and nearly new MH’s as we continue to develop new sites to maximize the value of the property. As Brandon has correctly mentioned know you market as how much your customer can pay. New $60,000 homes are a difficult sale so we stay in the $40,000 or less area. Normally I would not be giving comments but since the rash of low cap rates we are not spending time doing DD
 or looking at properties. As mentioned we had an offer on a S. Florida property that appraised for actually $2,300,000 and made an offer for $2,500,000 (sellers turned it down) for 7 cap that needs a high level of management since it is a snowbird RV parks and for the sellers priced it at $3,000,000–crazy–still looking for parks–still can help someone in the South Texas market or someone developing since parts of Fl. is possible since NEW parks are being developed.

My point was precisely that if you can get someone else to finance your POHs to future park residents, then you end up with a nice chunk of cash back right away (possibly recover your down payment, buy another park, repeat). If you do the financing, recovering your down payment is not immediate.

Very good discussion and comments by all. Thank you

As part of that combination of efforts to fill up my park I want to offer some assistance for mobile homes moving into my park
 Does anyone here have any good wording for the advertising or good agreements for this? I have the one from the reference library, but wondered what if anything some of you might have tried and how well it worked.

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Two or three months free lot rent is a nice one.

Thanks @Brandon! I am ordering banners for the fence today!

@Brandon, you said you run a rental operation. Are you using the Rent Credit Program or straight rentals? Or doing a seller financing program of some type? I personally like the idea of getting a house payment and a lot payment out of my investment but I know that hurts my exit strategy which is why I made this post in the first place. I am trying not to shoot myself in the foot so to speak.

Carl, I’m curious what market you are active in.

To answer one of your original questions, the answer lies with the lenders who will finance the purchase of your community by a purchaser. Some will lend on communities with park owned homes and some will not. That will drive your value by increasing or decreasing the number of qualified purchasers.

Todd Foster

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We do straight rentals but we encourage our tenants and/or prospective tenants to purchase. We do in-house financing in Texas where we are licensed to do so, and we are stuck wondering what to do in Michigan. It is a real problem if you don’t want to rent (a particularly nice house).

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My local bank will finance 25 trailers at a time for 7.25%. They also tell me that interest rates will go up 4 times in 2019!

An alternative to the Cash Program that no one is discussing and a non-competitive market is to go to the Local Tax Office, and inquire about all the mobile homes that back taxes are owed. A certain percentage of them are abandoned homes and the taxes won’t be redeemed, meaning, after so much time and notice, you can get title to these mobile homes for just the back taxes. A very inexpensive way to fill a lot. After getting title, you can move the mobile home, fix it up and rent it out, or sell it on contract. Maybe look for delinquent tax liens on homes that are the year 2000 or newer. With a little bit of work, you will find tax lien certificates you can buy getting a very good interest rate on, and then eventually foreclose upon after being so many years delinquent by serving all interested parties in the mobile home their right of redemption notice.

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