Small Park in MO - Wanna partner up?


#1

16 space + 1 for the office.

13 acres

Well water/septic sewer

11 park owned homes (older)

$125 lot rent

Built in 1979

Town has seen over 5% growth since 2000.

Owner is willing to LO for $1200/mo.

Anyone in MO want to go in?


#2

Hi Bob,

I’m not interested in this size of park, but I do enjoy working the numbers of parks and hope you find something useful here.

Here’s what the numbers suggest:

Lot rent = $2,000 p/mo ($125 x 16)

POH rent = $2,200 p/mo (estimating $200 rent x 11)

Gross Income = $50,400 p/yr. ($4,200 x 12 mos).

Expenses = $17,640 (since you didn’t specify, I’m figuring in 35% due to the septic)

NOI = $32,760

Debt Service = $14,400

Net Income = $18,360

You’ll have to probably be more specific with the expenses to let someone know what the actual NOI would be. Also, there appears to be no upside unless there are vacancies that you haven’t mentioned.

Just my .02.

Post Edited (07-16-08 19:02)


#3

I am not necessarily interested in this small of a park either, but if an opportunity arises, I would like to take advantage of it.

This is not for everyone. But for someone in the area, that does not have the means to invest, a 50% interest for no or low money down might be interesting. And even if you have the means to invest, who can resist a no or low money down partnership?

I am just looking for a local partner. That is all.

I assume you are not in MO, is that correct?

(Too bad on the bird-dog thing, as I am aware of 6 more parks for sale currently not listed by an agent within the last 2 weeks.)


#4

Nobody in MO is interested in an ownership without cash? Just boots on the ground?

Say it ain’t so!


#5

Bob,

What is too bad on the bird dog thing is that you are unwilling to share information. Yet you want to participate in a free forum run by and visited by people dedicated to the principle of helping each other succeed in this business. Perhaps readers in the Mo think you are selfish and are afraid you are only concerned about yourself whether that is true or not.


#6

How do you use 35% expenses for this size of a park with 11 POH. I admit I don’t have actual experience with owning, but from all of my reading the expenses should be closer to 50%.

Due diligence would of course be key, but the private utilities on a park this small are cause for concern. A redo could cost as much or more than the property is worth.


#7

Hi Walter,

I was trying to be generous, since the information provided is quite sketchy. If the tenants are direct billed on everything, the expenses could probably be in the 35% range.

I was simply trying to see the most positive spin on this property. As I had stated at the end of that post, he would have to be more specific with the expenses for someone to make a valid decision.


#8

I am sure that you would like others to spend a great deal of money cultivating leads and then give them to you. So would I.

Fortunately, I have been contacted by a couple of MO investors that are interested. I am not sure however that they are close enough to the park. So don’t you worry about me. :slight_smile:


#9

Ricardo, this one cracks me up the most.

“As I had stated at the end of that post, he would have to be more specific with the expenses for someone to make a valid decision.”

As if all the information given is all that would be needed to make a decision. Do you have all the information needed in any Loopnet listing to make a decision? And all you get is the leftovers on Loopnet. WOW! I am not selling anything. I am looking for a partner.

And you are not even in MO. ??? Are you not looking for CA property?

Why would someone that is interested in owning a MHP not get involved in a lease option that would require NO MONEY DOWN? That is pretty much a no brainer.

If you are not interested, no problem. There are plenty of folks interested in MHP’s.


#10

So Ricardo, if you were interested in this park, what would you pay? Just based on the limited information available. Inquiring minds want to know.

Of course, you will have to base your price individually on these terms.

  1. L/O for 5 years, no money down.

  2. 20% down, owner financing.

  3. 20% down, bank financing. (good luck w/ POH’s)

BTW, I have to increase the size to 18.5 acres.

Since Ricardo has turned this into an exercise, let’s work it out. Everyone may join in with their opinions/estimates. And please do. Anyone can work out a “ball park” estimate with the numbers provided.


#11

Hi Bob,

I’m almost unsure if I should answer, as every time I try to be helpful you appear to get angry or insulted and answer with either an attack or a borderline insult.

I hope you understand that my intent is neither to insult you or to tear apart your deal. My goal is only to be helpful. I have been involved in enough business purchases to understand that many people don’t always have the knowledge or experience to look at all contingencies and challenges, and I hope that I may be able to help someone see something from a different perspective.

From this post:

“As if all the information given is all that would be needed to make a decision. Do you have all the information needed in any Loopnet listing to make a decision? And all you get is the leftovers on Loopnet. WOW! I am not selling anything. I am looking for a partner.”

I guess I must clarify to you that you are selling something: equity in a partnership. You don’t have to sell something only for money for it to be considered a sale, it can also be sweat equity (as it is in this case) or trades, etc. You proposed a business to anyone that is interested and asked them to join you in this venture. I agree with you that nobody who is smart is going to get involved with the information provided. They will need to know more in order to make a valid decision.

When you come here and offer a partnership, it would help your position if you provided critical information. This will strengthen your position by: a) letting potential partners know that you are detail oriented and understand the basic business model of mobile home parks; b) give them enough information to make an initial decision confidently; and c) lay out the information in a way that you could get great advice from experienced operators on these boards.

I have looked at over 65 parks and just put one under contract this week (141 lots), and it only takes me one e-mail or phone call to get the basic information:

1 - Number of Lots

2 - Vacancies (to get vacancy %)

3 - Property size (to get lots per acre - don’t like anything above 10 per acre)

4 - Average Lot Rent

5 - Gross Income

6 - Expenses

7 - NOI (Net Operating Income)

8 - Number of POH (Park Owned Homes)

9 - Rent Amount or Lease/Option Payments on POH

  1. Asking Price.

I actually send the brokers or owners this list and I get it back 90% of the time. This information is enough to plug into my spreadsheets and see what it will produce over the next 8 years. This will let me know if it is attractive to me or not.

When you present an opportunity, if you were able to provide this information I think you would find a lot more serious interest. I am unsure if you either don’t have this information or you think that sharing it would not be a good idea. Again, I’m not trying to challenge you, I’m just trying to explain how it is that you can come across.

You also ask:

“Why would someone that is interested in owning a MHP not get involved in a lease option that would require NO MONEY DOWN? That is pretty much a no brainer.”

The answer to this is simple–because the park wouldn’t give them a rate of return that they find attractive for their work. In my breakout of the numbers above I showed that this property might give you a $18K return (but the reality is more like about $10K if you determine actual expense numbers). That is profit before taxes. So, would this property be attractive to a potential partner to make $5K before taxes (that is assuming that you’d give them 50% partnership, which I don’t think you would)? Is the work involved in managing this park and keeping it in good order worth $3,500 after taxes?

So, the cash is probably not enough, so maybe the equity in the park will be more attractive. But since there appears to be no upside (no vacancies to fill with POH) then the only way this property will increase in value is through rent increases. That means it will be a slow increase, and depending on the economy, it may not increase for a while.

You also ask:

“So Ricardo, if you were interested in this park, what would you pay? Just based on the limited information available. Inquiring minds want to know.”

It should probably be obvious now that the whole point of my posts is to let you know that more information is needed in order for someone to make a better decision. The information you provided is not enough to place a value on this property.

Having said that, the rate of return is not what I am interested in. That is not to say that it would be interesting to someone else, I’m just answering your direct question to me.

A lease/option isn’t free money. You need to keep in mind that at some point you will either have to exercise the option or step away from the property. That is the beauty of a lease/option. But you still have to put in a lot of sweat equity and increase your stress level to own and operate this park. So my question to myself would be, is the opportunity cost of this park worth it or not? That means, is the time and effort that I put into this park the best use of my time, or can I get a greater return somewhere else?

For me the answer is simple, no. Even for $5K or $8K a year after taxes (which I don’t think would happen with this property) it would not be worth it for me. That is not to say it is worth it to someone else, I am just answering your direct question to me.

Secondly, what purchase price have you worked out with the owner. In other words, at the end of the lease, what price do you have to pay? This is another key piece on a L/O deal because you need to project out to that point and see if you will have enough equity or cash to buy it. But that is probably getting to far ahead.

Again, please don’t take anything that I say personally or as an attack. I am simply exercising my mind in the numbers part of the deal – something that I enjoy doing.

Take care and good luck!