This is regarding “Buying and reviving old mobile home parkâ€. Why not buy old park sub divide 25 to 10 and sell posts.
New thought. Why not fix up the trailers that come with the park and rent out for $525. This way one can control how the park is run and managed. Numbers 20 units x $525= $10,500.00 NOI.
So what ya think about that thought.
Well. Mobile homes in general do not fair well as rentals. My experience is in most markets, you have a better run at this business if you lease the land and the homes are owned by the tenants. You can think of a mobile home park that rents homes as a big, flat apartment complex. So every water leak, ever time someone runs spaghetti through the disposal, every water line that freezes you have to take care of. Another thing we have found is the money you make over and above the space rent, tends to be spent back in people maintaining the homes, and rehabs when you get them back.
There are a few markets where rentals would probably work, like southern California, emerging energy markets etc… The parks I have run into that are rental parks look ‘rode hard- put away wet’…
So, If I was in the market for acquiring a MHP would I look at buying with all park owned homes and then selling or rent to own the homes? It seems like this would be the best way to add value and lessen the headaches.
Terry,
That is more of a headache than it might look like on the surface. A rental park, and a ‘tenant owned’ park encompass two very different types of occupants. Think of it this way- the rental park is a flat apartment building, and the tenant owned park is a small subdivision. Some people will cross over, but not as many as you think.
If your looking for out of the gate upside- utility issues, management issues, space rent…
filling spaces, selling homes etc can add value- but it takes many more skill sets, time, money and effort.
There’s no question that this is a value add, but a more difficult one. It’s better to buy parks that are “stabilized with upside” where the value add is much easier, such as raising rents, replacing the manager and cutting costs, billing back water & sewer, etc. On a project such as selling off a large number of park-owned homes, you will have the compexity of getting them converted, plus you will have to remodel a certain percentage of them, potentially get a dealer’s license, get in the middle of titles, etc.
On a park we purchased that had a lot of park owned homes, our biggest issue we had with converting the tenants to owners was their mindset. These people have always been renters and couldnt grasp the concept of having to do their own repairs. They would constantly call the manager saying something needed to be fixed. Along with all the lease paperwork and rent to own paperwork we have them sign a very simple “used mobile home agreement” got it at the bootcamp actually. Even with that, they still want us to do repairs. Eventually they figure it out but it takes time. We also found that these people that we converted, very few do any improvements to their home. They just keep the basics in order. On homes we have sold as handyman specials, we were able to get people who went above and beyond, making their homes very nice and they never called asking for a repair to be made. Of course we also had people buy handyman specials, work for a couple of weeks, realize its way to much work and then split. But we just sell it again and again until it sticks with someone and they make it happen.
I agree - the home income can add cash flow, but it is A LOT of work (for reasons stated above), especially if you are an out of state owner. On the other hand, if you have a long term hold plan, say 5 - 10 years, the money you borrow to bring in homes can be paid off in the first few years, and then the cash from the homes becomes gravy (after taxes, insurance, and turnover costs). Of course the ultimate goal is to get the lots filled if you buy a park with many vacant lots.
We have quite a few park owned homes and have been very satisfied with them. We do not do a standard rental with ours. All of our contracts are lease options and they are responsible for all their own maintenance. We tell them up front we are not in the rental business, we make home ownership affordable. the options are very simple. If you stay and pay your monthly bill on time, the home is yours after a set period of time. We have found that this gives us a different type of tenant that takes pride in ownership and it minimizes the risk that we have with regards to maintenance. If you are going to own a park, strictly lot rentals is certainly the easiest and most profitable way to go, but in todays economy it has been our experience that if we just waited for people to bring homes into our empty sites, they will sit there forever empty. We buy used homes, bring them in and get them set up and ready to go, and most are sold or lease optioned before they are ever completed. Every part of the country is different and we have found that this is what works best for our area.
My experience is similar. Today, few people can afford the cost of moving a home into the park. About the only way to fill lots is to rent homes. I do the rent with option and keep the price reasonable. I don’t like rentals but they do bring in the money. About 20% are rentals. Of the rentals, about 20% to 30% turn into a problem. The tenant gets evicted leaving the home with damage, needing repairs and owing a lot of money. As a park owner, you have be careful not to get too dependent on the rentals. Some of the homes I get are from evictions or people that ask me to buy them. I have also brought homes into the park. The problem with rentals is the cost of repairs if you don’t have people that can do the work below hired contractor rates.