Hi everyone,
New here, just starting on MHP journey after 32 years in single/multi.
Looking at a small 20 lot park with 15 occupied…advertised as all TOH, turns out 11 of them are owned by an investor who subleases to renters.
Bad idea? Dealbreaker? No biggie? Appreciate any insights, thank you in advance!
This is indeed a bad idea and dealbreaker. The home investor controls over half of your inventory and 73% of your occupancy, which means you would have no leverage over them whatsoever aside from eviction. Investor stops paying you, tenants still paying investor, say hello to a PITA court process to get the home removed and get ready to stroke some checks to get the homes replaced and reoccupied after months of not receiving lot rent.
Agreed. Bad idea. Too much risk centered on one investor. Betting he bought up these homes on the cheap and the margin worked based on the low space rent. You start moving space rents up (which you should do annually), tightens up his margins he will stop taking care of the homes then stop paying you and finally just walk away.
Thank you both for the detailed feedback, just what I needed to hear!
Sometimes the advice here is too objective. This is not a dealbreaker. If fact, when a deal looks so bad that most people think it is a dealbreaker, it can be a great opportunity. I would underwrite this knowing the risk is that one entity controls 75% of our inventory. Over time, you can try to transfer ownership to your tenants by working with the bulk owner. Maybe you can even go on an installment sale with him and purchase the homes over time. Know your risks, which were brought up here and make your offer based on your mitigation factors.
I’ve done a park deal when one guy owned 20 out of 62 homes. We spoke with him before closing and he decided that with the incoming rent increases that he would start selling all of the homes. I’d do another deal like that and not lose sleep.
Thank you mPark & K.Hodges for your latest feedback…I definitely agree “when a deal looks so bad…it can be a great opportunity.” You both gave me more to consider so thank you again!