Been looking for a park for awhile. I’ve wanted to start small, and I think this one fits the bill. Please tell me what you think.
Foreclosed property/Bank owned
14 lots. 4 empty. 1 abandoned home.
9 tenant owned homes. Lot rents reported to be between $100-140. I say reported because the bank will not release any information on rents (seems sketchy to me).
City water and sewer. Tenants pay all utilities. Water metered including on the empty lots (ready for a MH). There is a small dumpster on site which I’m guessing owner is responsible for.
Asking price is 101k. Talking the realtor, around 90k would probably get it.
Local CU will finance 10yr/5%/25%down.
I have 2 problems.
1. Can’t figure out why bank won’t release rent payment history.
2. I only have 15k for down payment.
Thoughts?
Question #1: 'Can’t figure out why bank won’t release rent payment history.'Response To Question #1: The Bank and Listing Real Estate Agent probably have no idea what the Rent Payment History is and who is or is not paying.As a Real Estate Broker in the past I have placed an Offer for a Client on a Bank Owned Mobile Home Park. In my particular situation the Listing Real Estate Agent stated that the Lot Rent was $150 with City Sewer.However, when the Potential Buyer went to the MHP and asked the current Tenants what the Lot Rent was then he found out that the ‘Real’ Lot Rent was $125 with Septic Tanks (some Septic Lines on, very near or over the property lines…which is not a good thing).Please note that the Potential Buyer did NOT tell the current Tenants that he was considering buying the MHP. Most Owners of MHPs do not want the Tenants to know that the property is for sale.Honestly, I do not think that the Bank nor Listing Real Estate Agent were intentionally misrepresenting the MHP. I think that they just did not know or were misinformed.Please do your own research on the MHP in terms of Lot Rent and Number Of Tenants.The Bank and Listing Real Estate Agent probably do not know nor have the Rent Payment History.The Previous Owner ‘might’ speak to you, but since the Bank now owns the MHP that might be a stretch.We wish you the very best!
If your close, drive through and stop and ask a tenant what lot rent is. You can find all kinds of stuff out this way. They don’t have to know your interested in buying the park. If your worried about them recognizing you later, have a friend do it. A park like this needs a turn around and the empty lots filled. FYI you will want more than 15k to turn this park around quickly. 15k may only fill one lot. I would want more like 50k to use as start up money on a deal like this. Down payment and empty lots will suck up money pretty quick. Personally I would not buy a park like this unless I had the goal on day one to get it full within a year or two. Best wishes.
lets just say a lot rent of 125 … you have 9 X 125 X 12 X .5 (very small park = high expense) = $6,750 NOI. if even the additional lots are filled, the NOI is less than 11,000. i would value the park around 56,000 at a 12 cap rate. bottom line … is this enough money to be involved.
Thanks for the feedback!
The park is about 40 minutes from me. I have been there. Talked to one resident and just asked if all of the homes had tenants. That’s how I found out that one of the the homes is abandoned. Didn’t feel comfortable asking rent information at the time, but I think I’ll go back and talk to some more people.
Kristin’s story has me a little spooked! I’m not at all interested in septic. The city water and sewer is one of the big reasons I am interested in this park in the first place. More due diligence.
Lot rentals in this area average around $200. I was thinking that I could come in and raise rents to $150 across the board and still be very reasonable to the tenants. Does that sound fair?
That way, I am looking at $1350/month income with property tax at $677/yr and whatever the dumpster bill is (I’m guessing around $100/month). That’s without putting a dime into the place.
I am DEFINITELY planning on turning it around within 2 years. I don’t know how hard it would be to get the empty lots filled. I was thinking of offering first 9 months free rent. Has that worked for anyone?
I understand that this is something that most of you wouldn’t mess with, however, I am on a limited budget and need something that I can get into without much capital.
Dean,
With the information I’ve given where do you see the 50% expense ratio? Are you including capital expenses to fill the vacant lots?
Thanks in advance!
What about advertising? Mowing? Insurance? Travel (granted, no flights or hotels but gas will add up quickly if you are managing it yourself)? Legal expenses? Property repairs/maintenance? Etc etc. Really small deals need some kind of very compelling quality (preferably multiple qualities) to be worthwhile. As an example, fellow member Jefferson bought a small park - like 20 spaces - but IIRC it was with 0% down, had fairly significant immediate upside(in submetering? or rent increase), and was very close to his other park (so he could visit both at once cutting on travel expenses PLUS package both together as an exit strategy). In that case, it makes sense. In your case, it really doesn’t. Starting out in MHPs with extremely minimal capital in a post-lonnie deal world honestly sucks. But that doesn’t mean you should do a deal just for the sake of doing a deal. Many operators will pay a referral fee if you find quality deals for them. If I were you, I would spend $2k of your money to go to a bootcamp to learn how to find and evaluate deals, then hustle like mad afterwards to get a decent deal under contract that you could then flip to another investor. Then all of a sudden you have a real downpayment to work with…
my guess at the expenses is a educated guess based on what I have learned on the forum and the home study course. at the end of the day, 40 or 50 % is not going to make that big of a difference. these are expenses related to the running of a park, and have proved to be consistent in evaluating parks. to fill lots, you will need to purchase a home, maybe 5K and then pay to have it moved and set up, another 3-5K, so figure a minimum of 8-10k to fill your lots. not a lot of people moving homes in parks these days so you will need to figure that out also.do yourself a favor and either attend boot camp or at least purchase the home study course and make good use of the forum. frank is very helpful, and always will answer your questions. good luck …
Much thanks guys. I will definitely take your advice. This is why I asked you all. I’m really hoping to find a good park with seller financing that works for me. Guess I’ll keep looking.
Thanks again for all of the helpful information!
S&S, remember that money follows a good deal. If you find a good deal out there, other investors will recognize that and be willing to partner with you. This will allow you to put your $15k to work and you’ll likely have the security of an experienced operator mentoring you through running a park. You may also be able to raise the money for a downpayment through a private lender on a compelling deal. The best advice any of us can give you though, is to attend the boot camp and take your time finding the right deal. kg2 brought up a good Jefferson story and I’ll bring up another. Jefferson didn’t buy his first park for over a year after he started learning about the business.
I attended the Boot Camp in Seattle, WA several months ago and it’s worth every penny of it. I would have wasted tens of thousands of dollars already if I did not have the knowledge Frank taught at the Boot Camp. Highly recommend it!!