Hi! I’ve been reading the forum for a month to learn and also make sure MHP investing is something I want to be involved in. It’s certainly more complex than investing in SFH’s but the model makes more sense to me. I’ve been analyzing listings and most seem very overpriced. I’m planning on taking the home study course now that I’ve decided to get serious but in the meantime I’ve found something that possibly looks decent but there are issues. It’s a 25 space park with 9 vacant lots/8 occupied lots and 5 vacant PO’ed rentals that need work/3 occupied PO’ed rentals. Is there too much potential here for a first mobile home park purchase for someone living an airplane ride away? Next, there’s an encroachment. It was caused when the city assessed a new setback for the street intended to add curb and cutter within the next 10 years. Three homes are currently encroached but some of the vacant lots will likely be affected as well. Nothing needs to be done at this time, but when work begins the homes will need to be moved forward or moved. Would this be a deal killer?Finally, there’s an issue with the security deposits. The owner sold the park and received it back after several years. Poor management is the cause of the vacancies. The previous owner never returned the security deposits and now that he’s been burned the owner does not have the deposits to give to the new owner. I verbally offered $115K but have now been told about the deposits. Advice on how to handle this? Lower the price on the front end or get those deposits at the end of the payment period?Lot rents are $165 and the park is on city utilities. Tenants pay their own utilities. The water/sewer is a concern. The owner reads the meter monthly and bills the tenants. He claims he cannot have separate meters installed per the city. The owner will finance with 28K down. He’s waiting to hear the rate I’m requesting.I welcome opinions! Should I run to or from this one? Thanks in advance!
I’m not the expert here, but I have owned a park for seven years. Let’s see…1. Do you have the cash to bring in new homes? What are the city requirements regarding new homes?2. What’s the demand like in the area? Have you run any test ads?3. 13 out of 25 spaces empty? Doesn’t sound like heavy demand.4. Setback problem could be a significant issue. Need to fully understand it and get the city’s situation and promises in writing.5. Park-owned homes can be a nightmare. They can be sold/given to tenants, but if the tenants don’t have much “skin in the game”, they won’t be maintained, no matter who owns them. Do you have the money/knowledge/workers to rehab them?6. My park is a 10-hour drive from me. But at least I can get there in one day and have a truck loaded with tools to use.7. Security deposits can’t be much; I don’t think that’s a major issue. Just factor it into the cost of the park.Me? I’d run.dave
Thanks Dave, I appreciate the feedback! I’ve added a couple of these to my long list of questions I’m asking the city about on Monday. I have run a test ad and had a decent response but nothing even close to the response we get from a couple of SFH’s we have in CA/AZ. I’m thinking part of that is the time of year. The park is 30 minutes from a city with a 200,000 population.My biggest concern is the setback and also the possibility of losing spaces. I appreciate the advice to get the city’s response in writing. The seller believes the city will eventually ‘offer’ to buy the park at a significant mark up (eminent domain I guess). I don’t think of eminent domain as being profitable so I’m not seeing that possibility as a positive. We’re paying for our daughter’s college right now so I was thinking this park would pay for itself for 2.5 more years until we have money again. At that point we could start filling the park up.Thanks again for this thoughtful advice and I’ll post again after I speak with the city!
I called the city and thought I’d give an update for anyone new at this (like myself). This park had lots of issues/costs.-The sewer laterals most likely need replacing and it didn’t appear that the city would pay the cost.-The new curbs and gutter cost are the owner’s responsiblity-$18K-$20K-AT least three water pipes are not draining properly and need replacing ($1500 each). If they freeze and break before replacement the city will shut off the main valve-As Dave indicated, the set back requirement is significant and will affect any new home brought in along the new road stretchThere is more but that was enough…too many problems for me! I will be ordering the course after the holiday! Happy Thanksgiving!