Hello Everyone,
I am currently reading the home study course. I am definitely glad I bought it and am reading now.
Besides the money being brought to the table for financing, what ballpark figure of a reserve do you bring to the table when buying a park to cover the costs that will crop up in lets say the first 30 days of actual ownership. I am assuming most of these costs will relate to insurance and taxes.
Thank you in advance and I may find this answer in my further reading of the manual as well 
A good rule of thumb is to have 4% of the property value in cash at all times.
That said, we try and budget for specific known deferred maintenance items at closing, and that will vary from park-to-park. The nice thing is that when you are buying MHPs (at least in the midwest) and are paying 10%+ caps, then you’ve got some cash-flow coming to you starting ‘day one’ of ownership. I even had a bank once allow me to skip the first month’s payment since we closed mid-month, so it was about 7 weeks until I had to pay the bank. With two rent collections coming in prior to having to make my first mortgage payment, that gave me more cash for maintenance (and a website, and newspaper advertising).
Good luck,
-jl-
Jefferson,
Thank you so much for the reply. This was one item that has been haunting my mind and this definitely puts me at ease and gives me a great starting point.
In a perfect world, you’d have the enough money in the bank to cover all the bills in the first month assuming you received no revenue, and enough to handle some larger repair & maintenance items (like a broken water line for $1,000). And you’d have a complete reserves budget to handle the replacement of everything in the park over its remaining useful life. But life is not perfect. While some investors have the liquidity to handle the whole year if nobody paid, or to re-build the entire park if a earthquake blew it to pieces, that is not the norm. Good investors substitute brain power for money in the bank, and that’s how they make their first park happen.
Do great due diligence, don’t buy a park that has private water or sewer, or master-metered gas or electric, or that is lacking a correct permit. Don’t buy a park in a declining market, or that’s in a hurricane zone. Don’t buy a park with more than couple RVs in it, and one that has one individual owning more than 5% of the homes. Run a test ad and have it pull a ton of calls. Make sure the deal is winner and that the worst risk you run is having to call roto-rooter.
I would bet on the guy that has bought the “right” park and done great due diligence but has little in the bank over the rich guy who has bought a total loser, done no due diligence, and has a million in the bank. Remember Clint Murchison, who used to own the Dallas Cowboys? He thought it was fun buying real estate sight unseen and with no diligence, and he lost everything. How much money would he have needed in the bank to weather his problems? Evidently, over $100 million was not enough. Most of the REO parks we see are the result of bad buying, not having enough money to handle repairs that pop up.
Thanks Frank. You guys are so on top of the advice you give here it literally relieves loads of pressure from my brain each time a read a post, and I read EVERY post (
This was a huge drawback for me in pulling the trigger after I dealt with that broker who was crazy on the CA park. These answers have really set my mind at ease with a direction to go in once I finish with home study course.
