I’m a first time investor. Looking to attend Bootcamp soon. I’m looking at different deals to familiarize myself with Mobile home Parks. There is a park where the current owner holds the notes on 25 out of the 30 homes. These would not be part of the sale. What potential issues could there be? Thanks!
The potential problem is you have one individual that will be in complete control of your community/business. He will pay what he wants and do as he pleases knowing full well there is very little you can do about it. You will become a glorified manager.
Your only option should you buy the park is to immediately jack the rents to a level where he can not make any money renting the homes and force him into a fight. Chances are however he will have a rent cap in the sale agreement.
Thank you for the help and insight. Rents seem to be at market so raising might be tough and I’m sure this would cause the current owner some heartache. Not sure about the clause in the sale agreement, definitely something to look at.
You will need to raise the rents far above market to place enough pressure on the home owner to force him into a fight. Bottom line is you will want him to sell off the homes to make them all owner occupied.
This would be a deal killer for us. We would have to have 100% control over that block of homes. All he would have to do is find another park nearby that has 25 vacants and move the homes there. Most park owners would even pay the cost of the move just to get those vacant lots occupied. Unless he is willing to sign an agreement stating that the homes can never be moved – or sell them to you – I’d walk that deal.
@brino11 , as per your question:
- “Current owner holds the notes on 25 out of the 30 homes. These woudl not be part of the sale. What potential issues could there be?”
I would completely agree with @frankrolfe
- “This would be a deal killer for us. We would have to have 100% control over that block of homes.”
I just contacted a Craigslist Seller of a MHP in NC. Below is his “Marketing Spin” on someone owning 11 out of 13 Lots:
- "There is a Husband & Wife that owns 11 of the 13 total mobile homes on the lot rentals that makes a monthly deposit at a bank where my account is and the other (2) lot renter’s also deposit at the same bank.
- “That way you only have (3) renters to collect from each month and you don’t even have to go personally collect yourself or hire someone to collect on your behalf.”
So what happens when the Husband and Wife decide not to pay or decide to move their 11 mobile homes? Not a good scenario.
- “Run away…run quickly away.”
We wish you the very best!