Looking to buy some new homes using the legacy land lord program.It seem to be a good deal to get some homes in the park with less money up front.Iam nervous about bringing new homes in seeing that they will take longer for tenants to pay off .Is this a something to be worried about? Is there any other in issues when buying new I might need to know about?
We found 4BR homes generate about 25% more money than 3BR homes. That means tenants actually pay off those homes faster than some older homes that are 3BR (or 2BR) that bring in less per month.Our markets (OK, and KS) are very family-oriented. (In a FL retirement community you’d be infilling with 2BR homes.) So infill with homes that are the appropriate size for your market. Don’t over-improve. A rough rule of thumb is that you want to infill a lot with a home that costs 100x the lot rent. So if your lot rent is $300, then you can spend $30,000 on a home (and that would get you into the range of new). If your lot rent is $125, you should be thinking about a home closer in value to $12,500. But other than not over- or under-improving a lot, it does not really matter if you are buying new or used (other than whether you need financing).Run the numbers and figure out for yourself and your goals if you want to be spending all-cash on cheaper used homes with no mortgage for you to pay, or if you want brand-new homes with a mortgage eating into your cash-flow. There are no black-and-white rules here, it just depends on your liquidity and comfort level with debt. And remember that larger, newer homes can actually get paid off faster than older, smaller homes.To your continued success,-jl-
Jefferson,my lot rent is 175 and I have been looking and have bought some used trailers in the15000-18000 total move in range.My park could use some nicer newer trailers and demand is good to fill them.The problem is finding decent used trailers so I thought that buying some new would be good for both issues.Ideally staying in the 100x rent price is exactly what I wanted to stick with but with demand and low inventory Iam stuck with making the decision on buying some new trailers.Is it a big no no on breaking that 100x rule? Thanks for all advice!
Kelley,There are two factors at play here. When you bring in new trailers (or newer repos) it makes the overall park look more attractive, and that will increase your value to an appraiser, banker and future buyer. So it’s not all about just the micro home price, but also the macro home value. If you do bring in new homes, use them selectively on the lots that would benefit most aesthetically (at your entrance, on corners of streets, etc.). So, yes, you can break all the rules when it comes to making your park look better on a macro scale (even a 1/2% cap rate difference is enormous money), but do it intelligently, and you’ll be fine. We buy our new homes from Legacy using their park finance program, so we get to leverage 70% of the cost. To get more information on that, contact Mark Ledet at Legacy.
Thanks Frank, all the information I have received from this forum has helped me make most all my park decisions.
I have about 100 lots and have been using Craigslist to fill my empty lots for years. The homes have been drying up over the last several years, but when I watch it daily and pounce quickly, I can usually find a home within a couple months of having an empty lot. I’m paying 5K-15K for what I call “nice” homes. Mostly 90’s 16 wides. If they are metal I consider painting them. I always put new skirting with timbers under it when installed. I usually put a new $1,200 deck on it. At the end of the day there is a nice looking home on the lot for 15K or so generally. You may want to consider expanding your range to neighboring CList’s also. My lot rents a just slightly higher then yours ($185 to $270). I can see why you don’t want to pay 30k for a new 14 wide! I recently had a women look at one of my 90’s 16 wides I just moved in. She had just looked at a 2013 14 wide that was 30k. It was 3/2 and the rooms were small. She loved my 20 year old 16 wide so much more, and it was half the cost! I had bought it for 9k, moved it in and was selling it for $14,900.
Iam doing the same on CL looking at it daily.One problem is finding homes that the owners are willing to take much less then what their asking.For example I talked to a lady the other day and shes asking 16900 for a 98 16x76 and Iam thinking more like 12 at the most if its in good shape with minimal repairs.Is there any trick so to speak on getting owner to come down on price? I do mention that the market is mainly cash for these trailers seeing its hard to finance used trailers and most lookers want to owner finance but they seem to want to wait and see for them self’s.
If the seller is not motivated then don’t try to buy right away. If the home sounds nice and is close I may go look at it just to make a relationship. Then leave a card. They may call you down the road. For the most part I just look for motivated sellers. Often I request pics via email or text. I’ve done it enough that I often have the price negotiated on the phone. Then I just go look at it to verify the condition. I bought one in Defiance OH a few months back. (I am out of Indiana) I only went to the home twice. Once to look and give them a deposit (I had the negotiating done on the phone), the other on closing day to give them a check, look at it, get the permits, and hide a key for the mover. Be patient. Best wishes.
Tucker 10:34PM
Time to buy more MH’s? I own a small park for about 18 months. I’m currently around 85%-90% occupied, but I always seem to have a few unrented for various reasons. I have cash to add some more units but I am afraid to do so because I’m thinking if I can’t rent these that I have now, why pay to have more I can’t rent? What are your thoughts? Thanks.
If you are having trouble renting your homes, then you first need to analyze what’s holding you back, as the demand for cheap housing right now is at an all time high. How are you advertising? You should have ads in the largest metro newspaper, Craigslist and MHBay, as well as great signage out front and direct mail to apartments, if necessary. What happens when the customer calls? You need to mystery shop the manager and call the number in the ads and see what they say. Often, they are so lousy on the phone that your advertising is pointless. If they answer the phone OK, then mystery shop them in person (hire someone to do this). See what really happens when the customer arrives. Finally, do exit interviews on those who call but do not buy, and find out what’s really going on with your pricing and make the necessary adjustments. You can get the phone numbers by having the calls go through a number that records the phone numbers. Our metric is three calls = one showing and three showings = 1 sale/rental. If you are not hitting those numbers, then you need to dig deep to find out what’s really going on.As far as buying more homes, if you are at 90% occupied, you have no need to fill lots for financing reasons. So the real question is which makes you more money: buying homes or buying parks. If you buy five homes at $20,000 each, then that’s $100,000. Your return on that investment is good, but maybe not as impressive as your return on $100,000 if you use that as the downpayment on buying a $500,000 park with 20% down.
That is all good advice, thank you very much! However, if I am not looking to buy a new park, I guess my question is should I take the risk of adding new homes that could remain vacant, or just continue to keep things as they are. On one hand I would like to add homes to increase the income, but the concern I have is that they will stay vacant. Can I assume that if I typically run at 85%-90% full with 45 units, I can achieve that same occupancy with 50 units?
I am interested in adding a few homes to my park, if my occupancy I typically runs around 85%-90%, is it normal to expect that I could maintain the same occupancy with more units?
You need to scientifically figure out why you are not running at or near 100%. I would not add any more homes until you unlock the mystery of why that is not happening.
Thank you very much, will do.
Hey Tucker I received your PM, but may as well answer you here. Franks correct, figure out why your not running above 90%. To expand on this I will give you some common reasons that may have something to do with it. 1. Screening. If your not screening correctly, you will have more turnover. Period. The tenant your screening may not stay long, and he also may piss off neighbors making them want to move. I tell people 4 things before they move in. “1. Get along with me. 2. Get along with your neighbors. 3. Pay your rent on time. 4. Keep the place up and looking nice. If you can’t do these 4 things you may as well not move in” 2. Home Types. Do you have a bunch of 12 wides that are not renting? Would bringing in 16 wides be more attractive to people? Sometimes floor plans and older models only attract trouble. 3. Park attraction. Do you keep the park up? Screen Tenants? Enforce rules? Once people realize your the real deal they want to live in your community. Peoples friends and relatives will want to move in. Its contagious. If you maintain the common areas and fix up the new homes you move in with decks, paint, and new skirting (put timbers or 2x4’s under it!) it will make other people follow suit. Are you getting calls on your empty homes? If you are getting lots of calls and are running at 85% you can do better. I run about 95% average and have for years. Once you get it running well you can cherry pick the best residents and things just keep getting easier and more profitable. If your getting calls I would suggest you know what to do. Keep educating yourself and go do it!Best wishes, Briton Post