We are approaching three years as a mortgage holder of 45 spaces (between two parks) in a tertiary market 15 minutes outside Wichita Falls, TX.
Previously owned by slum lords we acquired it with 23% occupancy and trees that had never been trimmed, much less maintained.
We have gone through evictions (about to start another), more contractors than we care to count, name it and we have experienced it. Occupancy is now double than where we started. Income is just under $5k/month.
Current tenants pay $175/ lot rent but as we market spaces for new tenants, we advertise $200/ month for lot rent. Tenant is responsible for all utilities. There are seven POH occupied, with the potential to bump that up to nine. We have eight teardowns and nine MH’s that need significant rehab that I am letting go for free just to get lot rent. Sixteen lots are vacant.
We applied to 21st Century Mortgage, but that was a year ago when things were dismal. We may apply again soon.
So, a few questions and feel free to critique – thanks in advance for any and all comments.
We spend A LOT of money to get these homes livable for people to move out in a year when we haven’t even recovered our investment. What is the best practice timewise to recoup renovate money on older units? Or is the better question, what should my cap be to spend on renovating an older MH? (1980s)
We have thought about bringing in a partner, but since we live in South Texas a condition would be that the person lives in North Texas. Is this a realistic request/condition? What could we offer a partner with $150K capital interested in this deal for a % of the parks?
Where does one even begin to determine if converting a park to community ownership make sense?
I know that people in our culture like to do everything fast and expect instant gratification. Buying these parks has often felt like taking one step forward and 5 steps backward. How does one balance the slow and steady approach to answering the question - is progress being made?
When rehabbing older mobiles home we do take steps to make them more dummy proof for renters or those converting to TOH. This means upgrading the plumbing to PEX to prevent leaks from the stock poly tubing in them, upgrade the faucets to single family grade, floors to laminate, and new roof. HVAC should be window units for a park with $200 lot rent. If the whole unit is gutted we will replace all the particle board floors as well, otherwise just patch usually in the bathrooms and select kitchen areas.
Sure there are plenty of investors in Dallas / Ft Worth market that could be targeted. You will need to detail a bit your plan how you will use the 150K capital and justify the % ownership attached to that. See #4 below for more details.
Sometimes your debt service won’t even let you convert POH to TOH, so you have to meet that mark first. Get all your basic revenue and expense items operationally fixed first (e.g. passing through utilities, garbage, rent raises) then look at your numbers and how they are affected by those conversions over a period of time based on your market. With 100% TOH you can probably get rid of any property management as well, which must be factored in to your calculations.
Don’t forget that you bought a huge project, and a multi year plan is not unreasonable, even though it feels like a nightmare. I always get a detailed project plan together with specific tasks I (or my crew) plan to complete on a weekly basis with contingency so that I can compile a realistic timeline. Track it and adjust as you go. This will help you get your plan of attack together so that you do it right the first time, and surprises are minimized. I am doing the same thing with my RV park development. For a couple months I was having the same feeling that I wasn’t making the progress I wanted…but after putting everything on paper it all starts to make sense. It’s not so much that your plan was bad, but the visibility to everything it takes to complete something is not at cumbersome when you don’t write it down. This whole thing will also give credence to #2 above when seeking an investor.
Keep us posted on progress, and thanks for sharing.