Looking at 1st MHP

mobile home university
1

Saw a MHP come up on the MLS the a couple months ago. It caught my eye but I was busy with other deals at the time. It’s still there and I’m really thinking about it. I have bought just apartment buildings so far. They are great and are creating wealth every minute of every day. But I can’t buy them fast enough to “semi-retire”. By that I mean having the ability if I wanted to…aka making more money passively than my bills.

Then it hit me. I had read about MHPs and Lonnie Deals for years and I have the opportunity to do both! PLUS there is alot of room for equity growth which can speed up our growth. We could use that money for another MHP or further our Apartment building portfolio.

That being said here are some factoids on this MHP:

Asking: $250,000

Taxes: $4000

Insurance: Owner says they pay 600 per year but I have not called around to cross check yet

Water: well

Sewer: septic

Single-wide lots: 22

Double-wide lots: 3

Total Lots: 25

Total Lots Rented: 9 with a 10th coming soon I hear

Lot rents vary greatly: $175-275

Here are the numbers I have so far: Inc - Rent: 32,769; Total Inc/yr: 32,769; Exp - Electricity: 1,001; Exp - Ins: Fire/Liab: 506; Exp - Maintenance: 1,180; Exp - Taxes: 4,000; Exp - Water/Sewer: 702; Exp - Other: 1,808; Total - Exp/yr: 9,197

note Park owner owns one home that will be rented (they are renting for 400 plus 250 lot rent) soon along with two others that are being torn down. Owners son owns 3 as well but lives in one, rents another, and one is being torn down.

Most of the waterlines were replaced in 2011. BUT it does mention that after 14 lots are rented a water analysis must be completed. Is this a big deal? People are using the water now…but it’s under 14. What makes that the magic number?

Owner is selling due high nursing home costs. I asked their realtor if they would consider seller financing since they are very motivated and was told no because of the need for medical care. That indicates to me that they are very motivated. High bills + distressed property

I have done alot of calculations based on reading I have done and I come up with numbers anywhere between 155,000-220,000 depending which I use as a good purchase price for the park.

I’m ok with going to the bank. We have plenty of cash for a 20-35% down payment. But i’d like to preserve our large chunk as best I can by using creative means to purchase a few properties.

I thought I would offer them $150,000 with $50,000 (to help with the medical bills) down. Or maybe start with $30,000 down and they finance the remainder at 6-7% for 3-as many years as I can get. I suspect that, if they agree to seller financing, they will not go for any longer than the 3 if they need it for nursing home costs.

Other thought is to offer the $150,000, with them financing 50% and the bank finances the other 50%. Gives them a very nice LTV ratio. We could put 15,000 into it to get some “skin in the game” for the sake of the bank.

But I want to borrow money to put in mobile homes. That money would be put into escrow and only used as we buy, place, and repair mobile homes. Has anyone done that before? What do the banks think of this?

What’s everyone’s thoughts on this park? Good deal? I think so but the SAFE act has me worried. My original play is the ‘original plan’…buy a MHP and get rid of park owned homes and get it back to a land only deal.

I’m hesitant to just rent the mobile homes. I see the damage people can do to apartments. I would much rather sell them…

Thanks guys.

Brad

2

Based on the facts you presented, in my opinion this park is worth 9 (occupied lots) x $225 (avg. of lot rents) x 12 (months) x .5 (50% expenses on this type of park, minimum) x 10 (to get to 10% cap rate) = $121,500. However, even then it won’t probably work. Problem #1 is private water and sewer, which is way too risky for a 25 space park with this much vacancy. Problem #2 is that no bank will finance a park with more than 30% vacancy normally. Problem #3 is that it will cost more to fill those vacant lots up to stabilized occupancy (80%) than you are spending for the park.

You need to find a deal with at least 70% or so occupancy, city water and sewer, and seller carry (unless it is truly bankable on day one).

Parks are great, but this park will be a disaster as far as my math tells me. But, then again, I’ve never seen the park, or the potential of the market.

3

I clearly have alot of learning yet to do about MHPs Frank. I was worried about the well and septic but around my area I’m hard-pressed to find anything with city water and sewer as most are out in the country. The few that are with city water and sewer are 100-300 lot MHPs and are not coming to market anytime soon.

Glad I brought this to the forum. Brought me back to my senses. My crew is here so I can’t go to far away just yet. Back to apartment buildings…for now.

4

Brad,

You don’t need a “crew” with most mobile home parks, so don’t let that be what governs how far you’ll go to buy a park. We buy regionally, not even in a specific state – you’ll limit yourself too much. It’s much better to have a great park 10 hours from home than a lousy park in your back yard.

In the average park, we have a few homes to renovate on the front end, but that’s not a big deal and then nearly none after that. There’s really nothing for a “crew” to do. One good manager is all you need.

5

Thanks Frank. I’m going to keep looking for one that will make sense. I will own a MHP someday. Until that day comes I’ll stick to collecting apartment buildings.