Help! MHP Appraisal

Hi,   I am buying my first MHP. Purchase price of the property is 215,000. Park contains 7 homes and 1 single family house. As this is a small park it was extremely hard to finance this park. After 6 months of struggle i finally found a small bank who are willing to finance the deal. Property cash flows 15,000 per year after debt  and expenses. Now the bank shopped around for appraisal of the property and they came back with a quote of 3200 dollars. I feel this is really a lot. I tried talking to them and they said i cannot shop around and it has to be through their 3rd party vendor. I am not sure what i am supposed to do. Please any advice is greatly appreciated!ThanksGowri

In between park is city water and sewer and tenants pay all the utilities. Currently each home is rented for $475 - $500 per month. Lot rent for similar parks around is $250 - $275. The single family house rents for $700 a month.

Jayagowri, was the Appraisal of $3,200 the lowest bid that the Bank received?At the beginning of this year we purchased a MHP with Local Bank Financing.  The Bank shopped the Appraisal around to 3 different companies and then selected the lowest priced Appraisal.Do you need a fast turn around on your Appraisal (ie…you need to close quickly)?If yes, that ‘might’ account for ‘some’ of the higher cost.We wish you the very best!

Well they got the bid from 2 different appraisers and one was for 2800  and the other was 3200. But you are i had to close this park by December 15th and that’s the reason i had to go with the higher bid.Thank you for the response!ThanksGowri

Gowri, can you get the Seller to sign an Extension on the Closing?Or is it worth it to you to pay $400 more to close on the MHP as soon as possible?The sooner you close…the sooner you start getting cash flow.However, if you are ok with pushing the Close Date further in the future, you might be able to ‘convince’ the Seller that if he closes in 2015, he would not have to pay taxes until 2016.We wish you the very best!

Park is to small to have any efficiency of time or future value unless there is another higher use of property.     Save your money and have a minimum of 25 spaces that can be bought 40% under value so the future buyer has a reason to buy.        From experience a 100 space park in some cases is as easy to operate as a 50 space property and banks are more available. and FUTURE BUYERS more plentiful.    Ask Frank or Dave the last time if ever they bought a park less than 20 spaces.

Carl, it is true that there is an ‘Economy Of Scale’ (a proportionate saving in costs gained by an increased level of production) gained by an increase in the number of Lot Spaces.However, not everyone has the money to purchase 25 or more spaces.Everyone has to start somewhere.Obviously, Gowri has run the numbers and feels comfortable with this MHP purchase.Gowri, we wish you the very best!

 Jayagowri, if you do not have the cash to purchase a 20 pad park and this small park feels like a good start to your business I think that’s great. I’ve got 5 small parks and I started with just one. I do hope the location of the park is close to your home as managing a park like this from a distance would make the park much less valuable to YOU.  It has City utilities so that’s good. It took you 6 months to find a bank to finance for you. If you really wanna do this I wouldn’t let a few hundred bucks extra for an appraisal kill the deal. When your more established and find larger parks you’ll be able to shop banks more. Do your due diligence! When you begin managing the park set the tone with the residents right from the beginning.  I hope it goes well for you.

My first park was 225 spaces at $10,000 down at age 30–think big–my smallest park was 60 spaces.     Remember who will buy your park in the future and rest assured most small parks because lack of efficiency will provide just break even income when your VALUE your time.      Notice most people in the business are not interested in mobile home rentals–they are a problem with very little value to appraisals… 

Carl, could you talk about how did you get a big park with only $10,000 down? Was the park in really bad shape? Does it have city water and sewer? Thank you!

Simple, knock on doors and get your hands dirty and think BIG.    The best properties or buys are not necessarily on this web site, thus knock on doors and look for owner-managers wanting to slow down or sell.    The seller were given a life lease to the home on the property and were valuable in the transition even  though I was raised on a dairy farm and by 12 was operating and fixing equipment and doing the books.     The park was in excellent condition and full and with rural water and septic’s    A neighbor told me to check out the property and  we make a 1800 mile journey to buy a beautiful park and two years later sold it with $200,000 more in our pocket.       They did not understand the value of their property, period–and most first time buyers waste their time with small parks that are really not profitable considering time and future value.      The above story is 30 years ago and how much in today’s money would be needed for that $10,000?       I presently have a park under contract for over $3 million and the buyers said when leaving said “your park is much nicer and neater than expected and your number are right on.”   Have pride in what you do and offer value to your residents–they pay the bills and buy your next Lexis.

Carl, please give us your details on your Mobile Home Park that you have for sale?-  Location:  City & State-  Acreage-  # Of Total Lots-  # Of Rented Lots-  Lot Rent-  # Of POHs-  Rent Of POHs-  Type Of Sewer:  City Sewer /or/ Septic Tanks /or/ Lagoon /or/ Other-  Type Of Water:  City Water /or/ Wells (If Wells, The #)Thanks So Very Much!

Sorry  it is under contract to a hedge fund and believe their privacy and my own at this point will negate  that from happening.  The park business is changing dramatically but when I have owned a park more than 15 years and enjoyed my depreciation  it is time to see another challenge–finding the under value property is difficult.     The first time I look at a park I ask the question why would the next buyer want this property and what must be done to achieve it.     I have never bought a park in the city limits nor intend too and it needs to be  a 3 or 4 star property–notice the discussions about cites pushing their agenda and you never know what is next–we need to be to able to operate without needing an attorney at every move concerning their zoning, set backs, type of home, etc.

Carl, as a Real Estate Broker no deal is done until you walk out of Closing (hopefully with a check).Taking Backup Offers is always a wise move.  You never know if the first ‘Potential’ Buyer might backout.If you give your specifics on your MHP, you might pickup a Backup Offer from the Forum.Carl, what formula did you use to value your MHP?Did you use Frank & Dave’s formula to value your MHP?  If yes, what Cap Rate did you use?Or did you use another formula to value your MHP?  If yes, what formula?

Back to the original question.  Our fees are based on complexity and timing, and this is across all property types.  Timing seems to always be an issue with the lenders.  We will usually offer fees based on a quicker time frame or a longer time frame.  A seven unit park would be very difficult to find comparable for, at least in my markets.  Banks always want to see comparable sales, even though the investors buy the parks based on income. 

Kristen,   there are four groups waiting in the wings to buy!!

Carl, through the fog of sometimes incoherent rants you manage to make some wise points. However, I’m willing to wager most people on the forum think you’re full of crap.

Civilly is an important trait for business people I hope you might be nicer in your choice of words.     I want to give thanks to the great country that we are so blessed to live in and from the times of George Washington realized that God’s hand of providence is been upon US and the need to continue to have His blessings.     I wonder at the many workers who could not be with family since the taste of money can destroy a Thanksgiving day for some–hoping the very best on this special day!!!

thanks Carl, and happy thanksgiving to you and all the folks here.

GeorgeNiko… Ditto on that!!! I always kept to my opinion:>)