So thanks to Frank and Dave's excellent resources I'm in contract on a a park of almost 100 lots in a northern midwest state. It is a semi-distressed sale by an out of state owner who just wants out of a basket case park. This took about 6 months of searching with approximately 40 hours per week of my time and 25 hours per week of an assistant doing market and comp research. Frank is right - it's a numbers game. I've purchased in down markets when everything in sight was a deal. In this market value can still be had but it has taken systematic research effort and a willingness to slog it out day after day examining deal after deal.
What kind of eviction rate can I expect in the first month at a place like this after implementing no-pay-no-stay? 4 residents out of 68 are currently behind more than 2 months lot rent and another 6 are behind between 1-2 months. Any other feedback is welcome. Thanks in advance!
-City water/sewer, almost 100 very spacious lots.
-Surrounded by single family homes over $200K in value with some new homes almost $500K,
-Very nice town almost 30K, metro almost 100K, low unemployment rate under 5 percent and lots of jobs and diversified employers.
-Priced at about 10 cap on existing occupancy once park is stabilized.
-27 lots to fill in a good market. I have the capital to bring homes in as fast as I can rent/sell them. Once full, NOI should lead to value about double what I am paying for park.
-68 residents, only 9 POH.
-Homes are mix of 70's/80's/90's/2000's product.
-Roads and infrastructure in great shape. I will sealcoat the asphalt but there isn't a single crack in it anywhere.
-Test ads pull well
-Park is a complete basket case. P&L's make absolutely no sense so I am buying on Frank and Dave pro forma. It's owned by an out of state medical professional who doesn't own other commercial real estate. Managers appear to be robbing him blind based on financials.
-Half the owners have been there less than 3 years.
-Rents are already about $20 over market. Upside is through stabilizing on existing occupancy and then bringing homes in to fill the park from 70% occupancy to 100%.
-Current owner bought park at a sheriff sale 3 years ago from another out-of-state owner who drove it into the ground, and this guy hasn't done much better in operations.
-I can't tell if the 50% yearly turnover indicated by rent rolls show that park is stabilizing over how it was when sold at a sheriff sale, or if it's getting worse. But this turnover is happening in the resident owned homes as well as the POH. This is not normal, right?
-Local cops and the broker say owner is never there, that there are drug problems at the park.
-Rent rolls show 10 of 68 residents more than 30 days behind on rent - 6 of which are more than 2 months late.
1 - Fire manager and bring in new one.
2 - Implement no-pay-no-stay immediately.
3 - Clean junk off property, get rid of excess cars, spend $1,000-$1,500 per home to paint and clean up exteriors to make park more attractive to new residents.
4 - Re-name park and start buying used homes, moving them in and filling up empty spaces. Fill 1 space per month and have park filled to 100% in 24 months. I'm budgeting $20K per home for purchase, delivery, rehab and site prep. IE buying used home for $10K and spending another $10K on the rest. Then selling or renting and hoping to re-coup 50% of my capital cost per site while gaining $300/month lot rent in return for the outlay and effort.
I've never owned a MHP before but we have successfully owned and turned around several bank-owned basket case apartment complexes.