I am a little frustrated because most of the parks that i have looked at have quite a few POH’s. Are there parks out there that are lot rent only parks that you can buy at 10% caps? with seller financing? I live in the carolina’s and most of the parks i am seeing have half or more POH’s in them. I own another business that takes most of my time, but I want to get in the mobile home park business on the side. Based off what I have read and posted on here, if you buy a park with POH’s you will have a lot more maintenance and headaches to take care of even if you have maintenance man and manger. Do I need to look at bigger markets with lot rents at $300 and above? will I have to get bank financing to buy bigger parks because most of those sellers will need cash?
If I buy a park with lot rent only, will I have to buy at 7-9% cap rates with very little cash on cash returns? On the recent deal I looked at, with seller financing with 52 out of 83 POH’s, the broker told me that i would be missing out on the deal of the century. He said i would be dreaming if I expected to get a lot rent only park at 10% cap and good cash on cash return. He informed me that I would be have to buy at 6-7% cap with about 10% cash on cash return. is he right?
Thanks for your sharing your thoughts and opinions. I have studied the books, listened to the cd’s and will be attending bootcamp in september in charleston.
Frank - do you have a park in the carolina’s you would like to sell?
I agree with your concern about POH’s. My park has 14 mobiles. All of them are tenant-owned, with four under sales contracts, so I am not responsible for their maintenance. I would steer way clear of POH’s unless, as my mentor advised, the park is large enough to have a full-time maintenance guy. I would just keep looking; I remember my mentor said that finding the right park can take a year. I’m putting my park up for sale soon, but it’s in Arizona, and I don’t recommend cross-country management.
Be patient, keep shopping. Define your requirements. One will come your way eventually.
dave
I’d dump your broker. He just wants you to buy the deal at hand so he gets a payday.
There are plenty of 9%-10% cap rate deals out there for land only. We’ve got one under contract at a 12% cap that is almost POH-free (approximately 7% of the homes are POH, and our test ads are pulling well, so we know we’ll be able to sell those off over the first 24 - 36 months). My first deal was 100% land-only; I paid an 11% cap and market rents were 40% below market.
You may need to take a ‘diamond in the rough’ and polish it up a bit and get a few POHs, but these deals are out there. And/or consider buying a park with those dreaded POHs, but pay a 15% cap (or more) and then sell them off and you will easily be left with a 10% cap deal on the land only after 2 - 3 years. Make lots and lots of offers - at prices that make sense for you. You’ll surprise yourself that before too long, one of those 8%-cap sellers will accept your 10%-cap offer and only want to know how fast you can close.
Good luck,
-jl-