Newbie MHP Questions - Taping others wisdom

Hi MHUers,

I am new to MHP investing and I’ve been catching upon on the previous threads and upskilling myself. I’ve listened to Frank’s podcasts and reading articles to understand markets a little better. I am gearing up to starting looking for MHP deals shortly.

Sorry if any one of these questions was already asked previously as I couldn’t find them in the previous threads. Sorry again for the long post as I tried to avoid creating multiple query threads. May I know

  1. What’s the general expense ratio for a) Utilities paid by residents and b) paid by the landlord? I understand that so many other things influence the NOI. Just want to know for the initial feasibility study

  2. Say, if we purchase an MHP worth $1mi, would the depreciation clock resets and can we claim depreciation on the roads, utilities and POH’s that form part of the sale?

  3. What’s the min. pad number in a given MHP that would trigger on-site management?

  4. What would be the on-site management salary assuming a 75-100 pad sale (on-site accommodation provided via. POH for collecting rents and disbursements etc)?

  5. If the incoming landlord decides to install a sub-meter system to pass on the utility costs to the residents, would the landlord be able to pass on the full charges (or) liable to pay any fixed utility costs (assuming there will be two components - fixed portion and usage portion)?

  6. Assuming $50K worth of immediate repairs after settlement, would these CAPEX costs be added to the Year 1 expenses that lower the NOI (or) has to come out from the assessed/ established property value?

  7. How long the rental leases can be in the MHP industry realistically as a month-month rental lease seems to be a general norm?

  8. Can you share your experience in regards to what has been an effective method in contacting MHP landlords about an off-market deal - whether via. text (or) cold-calling?

  9. In today’s market, are the MHP sellers comfortable in offering owner finance (noted that it depends). If so, may I know the terms of their seller financing offer, etc?

Thank you all so much

The rule of thumb is that the TOTAL expense ratio if you have private water/sewer is 40% and if public water/sewer 30%. In both of those cases are “Utilities paid by residents.”

However, that is under close-to-ideal circumstances. If you are not submetered (if the Landowner pays for water) then expenses will definitely run higher. Many operators find 60% and 50% can be more realistic.

You have the right idea. You can/should allocate the purchase price to the various assets you purchased.

You can’t charge the residents the initial capital cost of submetering or you’ll probably face a revolt. Also, state laws may vary on this point. It depends on the state, but it very well could be illegal.

This questions seems to be asking about how the Lender is going to look at it. Depends on the Lender. Otherwise I’m not sure what you’re getting at. CAPEX almost by def’n isn’t included in NOI. But it’s not subtracted from assessed or established value either. If anything, it would increase the established value.

The lease (right to stay) benefits the tenant more than the landlord. State laws may vary. Are you asking how long a lease can be? We just signed a 5-year lease for a home in our park. We also are happy to keep tenants on a month-to-month. Whatever the tenant wants is usually fine with us.

Month-to-month is advantageous because even on a 5-year lease, the tenant can up and leave (break the lease) any time and the landlord really doesn’t have much recourse ('cause they’re gone and you can’t squeeze money from a stone anyway.) Month-to-month sort of evens the playing field, allowing the landlord to discontinue the relationship at any time for no reason at all.

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