Hi, I’m looking to invest in my first park. I found a really nice guy who is retiring due to his health and is letting me do a 10% down deal on 2 parks. He’s willing to be a mentor as well. I have found a third that I may be interested in. I’d like to do this as a full time job (way in the future) but I’d need a few parks to fully match my income and still have money left to invest in future parks or other revenue streams. My life goal has to been to be a business owner and work for myself versus others making them or in my case accounting for their money from their business ventures. Would taking on two or three small parks of less than 20 pads each be silly for a newbie? All parks are over 90% and have more than a 10% cap and very positive NOI. Also, I understand Due Diligence, does it work the same with owner financed if you are doing a low entry down payment and could walk away after you recouped your down payment? Maybe I’m naive on this but thinking its not as much of a risk (unless the financing contract has some terms I’m unaware of at this point) that would prevent you from walking away before a certain amount of time versus buying the parks out right. The owner who is financing can’t just walk away like a regular buy out deal, correct? I am worried about a deal going south with a good owner financing situation.Any advice would be helpful with the next step to proceed with on these first deals.
How many occupied lots? What’s the lot rent? Who pays for the water/sewer? Is it city water and city sewer? Is it master metered gas or electric? What’s the population in the metro? What’s the median home price? What’s the average 2 bedroom rent? What’s the unemployment rate in town?
Hi Frank, as far as all of that goes I’ve done that research and worked with the seller on making sure the park is viable and lucrative with the market in the areas I’m looking in. But I really appreciate you asking those questions to make sure I’ve got those covered. I’m more worried about items such as major capital repairs. I’m not sure how that works in a situation with owner financing and who’d be responsible. I probably should have made that more clear. This gentlemen has had his original parks and built up to 10+ parks in multiple states, but he is older now with health issues and is only selling parks that he no longer wants to travel to. He’s willing to finance for 15-20 years so while I am finding out about the park and capital investments that need to be made, how is an owner financed deal approached as far as this concerned? If I bought outright of course, I’d be responsible but if he is financing to me, would I also be responsible then any improvements I make I’d just loose money if he walked away or I walked away before the financing is over? I’m assuming we can write all this out in the deal, but wondering if anyone has had problems like this with owner financing and how they handled. So far, I don’t see any issues but then again I’m not sure how you’d or who you’d get to do a home inspection on a mobile home park.Tammy
You would be responsible for Capital Improvements/Repairs and you would want to budget for those in your pro-forma before calculating your NOI and applying the CAP rate. Items such as private utilities, private roads, POHs, etc. will cause your budgeting for deferred maintenance to be higher. For instance, if you determine that your road will need to be repaved in five years, you would want to take the cost of repaving and divide it by 5 years. This would come right off the NOI and affect the price you would pay for the park. As for home inspections, you can really get any contractor to do that. There’s not much to a mobile home so I wouldn’t get too worried about that part of it.More importantly though, go get yourself a lawyer to help you iron out the promissory note on this deal. Take your P&S contract to him, tell him your concerns/what-ifs, and have him write it out to meet your desired outcome. In your first post you mentioned, “Maybe I’m naive on this but thinking its not as much of a risk (unless the financing contract has some terms I’m unaware of at this point) that would prevent you from walking away before a certain amount of time versus buying the parks out right.” In this instance, you are asking about recourse vs non-recourse. If you are the one (your lawyer) writing the promissory note, you control how this “contract” reads and plays out. Choose your lawyer wisely as he is the most valuable member of your buying team.
Thank you so much CharlesD! That is definitely what I was looking for. I’m used to doing home loans and working financing for business but this is totally a new adventure for me. I’m so glad to find this forum and all the great advice. 
As a home inspector I don’t of course really agree with that, especially in your situation. You can get a deal doing several at a time as long as you ask him to to major components only. The most common issues I find are rot to the floor below windows and doors, always give a good bounce test under all exposed openings, also termite damage is common, homeowner wiring, etc.