Accountanting, Water/Sewage, Tax returns

First of all I am extremely grateful for the assistance I get from here. The knowledge and expertise I recieve has allowed me to move forward in investing in the MHP business with confidence.

I just met with an Accountant today just to get an overall idea of what he can do for me and the cost.

I was told that I can roll over my business bank statements so he can decipher what will be business related and not and do a monthly Profit and Loss statement. I am dealing with a small 20 lot MHP.

His price was $150, it seemed high to me. I was reffered to him through some friends I have made in the area that own a motel business and have been using him for years. Does these numbers seem off?

The water and sewage is paid by the park as most of you know it is quite the expense and I will look into passing that on to the tenants as quickly as possible. I have reviewed the water usage for the last 2 years and was actually able to pin point last year where the water spiked around for a month so I have requested for the seller to disclose what caused the problem and how the issue was rectified.

I am using the due dilegent book and I am doing everything by the numbers. It has opened me eyes up to think for outside of the business books. It helps me maintain my professionlism and get things done.

something that has caught my attention was while reviewing the tax returns for 2011 and again on 2012 was on there Schedule E (Form 1040)

2011 indicates that $46,900 in revenue and $40,862 in expenses netting only $6,038

2012 indicates that $51,120 in revenue and $46,152 in expenses netting only $4,968

would this be something to worry about?

The park is at full occupancy but the rent hasn’t been increased in 4 years.

the deductions that are included consist of (Rough Numbers averaging both years combined)

2k insurance

10k bank interest

8k repairs

2.5k supplies

2.5k taxes

10k utilities and garbage

4k depreciation

I am looking at everything i have collected and going by the book and seeing if everything match up. Honestly the park is looking pretty sound I will incur more expenses I am sure then what is here as I plan to try to run it more professionally.

I am looking to possibly bring it up to market standards then relisting it at a 10% cap to later reinvest in a bigger park. I plan on using this as to get my foot in the door as I learn about the industry and grow more knowledgable. I can see how I can expand my knowledge on this intial investment but first and foremost I must insure it is a quality investment rather then a money pit that will sink my ship.

Free for all on any advice would be great.

I’d prefer eventually having someone as a mentor who I can turn to for guidance with questions and thoughts.

With knowledge is power, I seek to learn, and extract valuable information in order to grow.

I rather be taught how to fish rather then recieve a meal.

I can deal with the accountant saying $150/month because I can shop around if need be. The water and sewage is more so an observation just by following the usage history during the past two years.

I think my main concern at the moment is the numbers on the tax returns, should this be an area of concern?

You need to come to the Bootcamp and buy the ‘30 Days of Diligence’ book off this website.

I suspect the expenses are not quite that high. I suspect the seller is running personal expenses through his business. But you’ll need to dig into those numbers very carefully and really understand what you are buying. If the expenses are from a land-only MHP, then the expense load should be in the 30% - 40% range. If the numbers include rents from mobile homes, then your expense load will probably be in the 50% - 60% range. (You have to spend a lot more to maintain mobile homes than just land.)

But you really, really need to read the books offered on this website and come to a Bootcamp before buying your first MHP.

My 2 cents worth,


P.S. The $150/mo. for accounting, if it includes all bookkeeping and tax preparation, is reasonable, although I would expect it all to be closer to $1,100 for a smaller park (25 spaces or fewer).

P.P.S. I receive no compensation from anything sold on this website.

From a valuation standpoint, interest and depreciation should be ignored. Insurance at $50/site is not unreasonable. Repairs/supplies of $10.5k seems pretty high for a park that size…are there some park owned homes? Or do repairs include some capital improvements (roads, etc.) that would not typically be done every year? Also, where are the expenses for advertising, on-site manager?

The good news is there may be some upside with passing back utilities. How does the park’s lot rent compare to others in the area?

Good luck!

There is an old couple who lives in the park and collects all the lot rent for the current owner for $20/month they have done this for many years.

There are only 6 park owned homes the turn around is pretty low. They have no paid advertisement the couple who collects the rent gets the homes rented out by word of mouth if a vacancy occurs.

The mobile homes that are parked owned

1989 Fleetwood Reflection 14x50

1973 Guerdon Jackson 12x60

1966 Hill top 10x44

1967 Guerdon Guerdon 12x60

1972 Redman Newmoon 12x60

2000 Champion Legend 14x44

The lot rent is $120/month the other MHP’s in the area has lot rents ranging in about $190 ~ $215.

They regraveled the road this year which costed 9k to do. I can see in there income statements that they have it written up as a reoccuring expense.

Outside of the road being graveled they have repairs normally consisting of $3,500

There is also a restraunt on the property which is in a 10year locked lease. first 5 years at $1,200/month. Midway through there second year. The second 5 years the lease is goes to $1,500.

They are responsible for 100% of the maintance and regardless even if tornado comes and destroys the property the language of the lease dictates they still must pay. “If the Premises are totally destroyed by storm, fire, lighting, earthquake or other casualty, this lease shall remain in full force and effect. If the premises are damaged but not wholly destroyed by any such casuality, this lease will remain in full force and effect. Tenant agrees to have insurance in effect during the entire term of this lease in order to cover said damage, repair, loss of use, continuing rent, ect.”

I am not fully fond of the terms of the purchase but I feel like I can’t walk away when I can see myself turning money here.

The sale agreement is set for me to put 50k down and finance 100k for 4 years at 4.5%

I have around 10k going into my due dilegence. Friday and Saturday I have 3 electricans, plumbers and tree cutting companies coming into the park to give me a walk around.

There after I will pick a plumber to do the camera work, the phase one enviormental and the survey to have done the following week.

@ Jefferson I do have the due dilegence book that I am using to assist me during the process. I really want to buy all of the book collections available here along with going to a boot camp. I am currently strapped with this deal though. I opened up a 20k home equity line of credit that I would pull from when we hit closing so I can have the 50k down payment for the deal.

It will be awhile before I can feel the full strain the MHP is going to have on me. I know paying off the 100k in 4 years will mean that I could potentially see myself tapping into my personal finances until it is paid off. Increasing the lot rent to market values during my four years will put the park that is currently a 150k value with a free restruant at a 10% cap into a 250k park @ 10%. I may look into seperating the park and the restraunt and as mentioned earlier after pay off I would like to of had the park completely turned around ready to be sold as I upgrade. One step at a time though, so today I must wok on my due dilegence to insure I am getting what I paid for.

Does the lot’s and Mobile homes in this park seem to small?

I can find nothing in your postings indicating what your lot size is. But to be usable, a lot needs to be able to accommodate a 14’x46’ or 16’x46’ (we go with the 16-wides). 46’ is the shortest 2BR home made today. So your lot will need to be at least 46’-deep PLUS whatever setbacks your city/county requires.

Any lot that is shorter than that is not really a mobile home lot; it is an RV lot. That does not make it worthless, but it does make it worth less. :wink:

The homes detailed in your postings are indeed on the small side. I’d never buy a 12-wide to bring into one of our communities. That said, I’d not rip one out that came with a park I was buying either. But you need to run a test ad on CraigsList and in your largest local newspaper. Clearly state that it is a 12-wide. See what your response is. You probably need to be getting 20 calls/week for this to be a good deal. If everyone turns their noses up at 12-wides, then you may have to take those homes to the dump (which means they have a -$2,000 [negative] value). But if you get a lot of calls off your test ads, then you know you’ll be able to keep the 12-wides, and keep them full.

When I chat with people on the phone, I usually further qualify them by asking if they’ve actually got $2,000 in cash for the down payment TODAY if I show them the house. Of the 20+ calls/week, I’ll probably want to end up with 5 people that really convince me they’ve got the $2,000 and want the house.

Test ads really do ‘tell all’ about a property.