Evaluating a park and making offers

Hi all;

I took Frank and Dave’s bootcamp in San Diego, May 2012 and flipped through their study course book/listened to CDs. I already have investment SFRs and an experienced architect/urban planner. I want to buy MHPs but gun shy in pulling the trigger.

MHP deal evaluation seems to have more factors to assess compared to SFRs. I have the copy of the evaluation spreadsheet from Dave and Franks bootcamp however little bit intimidated by it because of detail it has.

question 1) Besides using Lotrent X pad # X .6 formula. Is there a quick evaluation spreadsheet that will take few minutes to evaluate and compare multiple MHP listings.

question 2) Generally brokers listings bundle income of park owned homes, lot rent and (sometimes even vacant lots) in one P&L to show high CAP.

what is the industry norm in making offers? Do I put a park under contract at the asking price and then negotiate during due diligence. Or do I make offer at the price that I am comfortable paying?

question 3) how do you send /make offers to broker listed MHPs?

question 4) How can I get over my shyness in acquiring a park and making offers. ( Worried that I will make huge mistakes in buying my first park as it is a new type of asset class for me)

thanks

Sema

Sema,

We have been doing SFH also, I remember our first one (of the search for it) we were afraid to pull the trigger then as I’m sure you were.

My advise it to practice, find some parks you think you might be interested in, do as much homework as you can, call owners and talk to them. The more of this you do the more comfortable you will become. When you find a park, have Frank or Dave take a look at it and give you some feed back.

We drove to the Bootcamp in Orlando last month and found a few parks along the way, we didn’t know enough about them to buy one if we found a good one, but we stopped and talked to the owners and had them give us a walk through the park just as if we were going to buy it. We even asked for tax returns, rent rolls, etc on a few of them just for the practice. We’re finding the more of this we do the more comfortable we are.

Good luck!

Leighnae and John

Where did you find the MHP deal evaluator?

pot Wrote:


Where did you find the MHP deal evaluator?

HI Leighnae and John ;

The spreadsheet was part of the bootcamp CD/memorystick they gave it along with other all docs. If you look at your memory stick you should have it there. If you can not find it, let me know.

Sema,

I am up in orange county and purchased my first park last year and have taken the boot camp. Feel free to email me and I would be happy to help if I can. sw@uwventures.com

I don’t know how others on this forum feel, but in my opinion the answer to your question number (2) is that I would not put in an offer at the “asking price.”

Instead do a little Q&A with the seller or broker and put in an offer at (or somewhat below) the price you would pay, IF everything is the way they say it is. In this industry that is generally based on a “cap rate” divided into the park’s cash flow before debt service, plus the value you place on any “extras” (park-owned homes, for instance), less the cost of whatever deferred maintenance or other issues you might have to pay for as capital expenses. It can’t hurt to be conservative – the seller will probably give you a counter-offer if your offer is too low to accept but you are in the neighborhood of reasonableness.

Thus, while you don’t need mountains of paper before signing, you will need to know the “numbers” up front – income, expenses (actual, not pro-forma), number of occupied lots, vacant lots, park-owned homes, etc, as well as a feel for what the park could bring if you manage it right (and a feeling for what could go wrong and how much it would cost).

During your due diligence period you should be looking to verify that everything is the way it is supposed to be – and narrowing down that feeling for what could go wrong and how much it would cost!

Nothing is ever completely the way it is “supposed” to be, so there will always be items to re-negotiate during due diligence, but you will have a strong bargaining position if you are able to accurately point out that you are not getting what you bargained for.

That’s just my opinion. Would be interested to hear comments!

Thanks,

Brandon

I agree that the conservative approach is the best. At the same time, there are some deals priced lower than they should be, and those deals are more important to tie up fast than to get a price concession. It is also sometimes easier to renegotiate a price down once the deal has been tied up and you can show the seller legitimate bids and flaws that come up in due diligence that were unknown at day one, than to guess at those and convince the seller to do the same. So I guess the answer is that every deal is different and requires a different strategy. But it often scares people if you offer the full price, whether it’s cars or parks or anything negotiable, so you might want to always go in under asking price as that’s the American way.