I just stumbled upon this site from a link in a email message from linkedin.com.
Great site and outstanding information!
I’m a real estate investor and Realtor in the Flint, MI area. I’ve been investing for about six years and have always focused on single family homes. I’ve done landlording, flips, rehabs, buy and holds, short sales and foreclosure deals. The one thing I haven’t gotten into yet is MH investing.
There are plenty of parks in my area but I’m nervous to take the plunge. My strategy would be to buy dirt cheap (which is actually relatively easy in these parts), and resell with owner financing. A traditional Lonnie deal. The carrying costs are what have precluded me from moving forward. If the unit doesn’t sell for a couple months, that can quickly eat into profits (lot rents are about $350 a month around here). Plus, with the area becoming so depressed the pool of buyers is depleating.
I grew up around the MH business. My uncle was a park manager for over 15 years. I was able to watch the inner workings of a park and what made them tick. One day, I’d like to own a park (or three) assuming they’re in the right area.
Any advice you guys are willing to share would be greatly appreciated!
We bought a fairly new 82 space park in Michigan a couple of years ago, so have a couple points of advice for you:
Michigan taxes the mobile home at 6% everytime it changes hands. Say you sell a mobile home and finance it, then the buyer defaults on it and you take it back. When you resell it the second time, you will need to pay the 6% again, and it can really add up!
Michigan also taxes the rents on a mobile home at 6%, so that can eat into your profits
Property taxes and water rates will be very high, but you probably already know that from your single family homes
Since no one in the state has any money, and I’m sure Flint is probably worse off than Jackson where we are near, non-payments and evictions will be a regular occurance. We’ve yet to find a way to add a lien to the title if someone stiffs us on the lot rent.
Thanks, Greg for the information.
I hadn’t thought about the sales tax side of the business. You make a very good point and it makes absolute sense considering the homes are personal property, not real.
Your last point is what really has me proceeding carefully. Flint is nothing more than a depressed town. Fortunately, the little towns south of Flint: Holly, Grand Blanc (where I live), Fenton, Flushing, etc. are still doing well. The people who live in those towns are the metro-Detroit commuters. I would be targetting anyone of those communities for a “Lonnie deal”. If the timing is ever right, the economy in the area improves, and it’s the right deal, I would definitely consider buying a whole park.
Is there a generic rule of thumb that should be followed when evaluating the purchase of a whole park? For single family homes there are a couple different rules I like to use as an “acid test”. If a perspective investment looks good, then I dive in deeper with looking at the discounted cash flows, etc.
I have a MH investing business in the Highland/Milford areas, though I do have some property up in Holly too. Greg brings up valid points that must be considered. I would say that in general Michigan is not a friendly state for doing Lonnie deals, but it definitely can be done.
As for valuing a park, search for “60/30 rule”. Let me know if you can’t find it and I’ll explain. I would HIGHLY recommend doing several lonnie-style deals before you consider purchasing a park.
yet to find a way to add a lien to the title if someone stiffs
us on the lot rent.
Try this. Get to the tenant immediately and bring a promissory note. Offer them a payment plan (negotiate what you want) and explain that it is easy for people to get too far behind too fast and that the investors would rather help with a easy payment plan and that they will release the lien on the title once re-payed in full. This technique (assuming good sales skills) works like a charm - now, during the term of the note and in case of future lot rent default - you have your lien. Evict and/or repo - whichever is easier.
P.S. - I grew up in Mt. Clemens, MI