Possible Deal

Think I have a possible 1st deal lined up from some of my marketing efforts that I may try to pursue.

Basics of it. Park has around 17 spaces. 9 of the homes appear to be occupied. 3 appear to be tear downs, un inhabited. There is also a small travel trailer Was told that this park is on city water/sewer. Lot rents are around 200. The small travel trailer is rented for 350. I believe 2-3 homes are owned by the current owner. Someone inherited the park and has been running it from 45 min away for the last 5-6 years. Says the highest water bill (owner pays ) was around 700 (when there was a leak). Average around 500 . Says city water and city sewer. Road is gravel with potholes in it. Was on dumpster trash which she said was too expensive so now on a few of the large cans up front. around 110 a month. Looking around 40k for the park (plus the two possible homes). Will be tricky to find out what they actually owns. Says they have kicked out druggies etc. Generally sounds problematic and not sure of how many people are actually paying. Claims 1500 in gross revenues on the park.

Let me know your thoughts. I would say the numbers are strong on this but the fact is so small will make it tricky to have huge potential regarding the amount of time I will need to invest. At the same time, I think the numbers are good that I can buy it and as being the first park/learning experience , may be ok for what I have to learn.

Looking forward to your input.

I would like to try and sub meter the park for water. Get dump homes out/ torn down. If anything is salvageable, rehab and sell etc. Any current owned homes, try to sell them. Put up a little fence on the front to enclose the trash and cover the front area a little. Put up a sign, fill in the pot holes and clean up some of the overgrown trees if we did move forward with it.

Any input regarding the take over is also appreciated.

We would probably just do a straight up buy on this without asking financing or I could offer a slightly lower cash price or a two year price where we could pay 1500 a month or something. I assume then it would be best just to get a phase 1. I dont think it would be worthwhile to have the homes inspected

I bought a park very similar to this at one time, called Spring Hollow. It was 15 lots with a bunch of park-owned homes and an old brick house. It was $65,000 with $5,000 down and seller carry. Your economics are very similar at this point with 9 lots at $200/mo would yield a value of 9 x $200 x 12 x .5 x 10 = $108,000, so your cap rate would be around 20% going in (assuming it needs about $10,000 of initial capital outlay to clean it up).

The challenges you will have with this deal are 1) the condition of the existing water and sewer lines 2) the condition of the 9 occupied homes 3) the condition of the 3 abandoned homes 4) verifying the city is not going to hassle you on filling the vacant lots 5) the initial cost to fix the roads and clean up the deferred maintenance.

The finances I leave up to you, as this is not a huge park and will never be able to hit the minimum threshold of mainstream lending or buyers. But the deal does not sound bad on the surface (if it meets your goals).

At a bare minimum, you need to use our 30 Days of Diligence guide to make sure you have the correct roadmap on the due diligence. A Phase I would be a necessity on this park.

Thanks for the response frank

I believe this is the guide here:

http://www.mobilehomeuniversity.com/mobile-home-park-investing-books-and-courses/mobile-home-park-due-diligence-manual.php

If we would like to obtain a copy of the contract as it states, where can we send the request to upon the purchase?

Also, is there a digital version of the home study course (including mp3s over cds ) just like the diligence digital version?

Ive read Ray Alcorsn deal makers guide and a couple of lonnie books as well as trying to absorb as much on this forum as I can. Been considering the home study course but was waiting unit I could devote a block of time for all of the material. I’d also would like to try and find a used copy but was not sure if these come available often and I assume the versions change on occasion.

Thank you

I’ve occasionally seen used versions of various books/courses for sale on eBay. You may want to program an alert on eBay to notify you the next time someone posts something for sale of Frank & Dave’s or Ray Alcorn’s. Of course, time is of the essence, and you may want to just ‘pony-up’ and pay for new and get on with it. (:P)

To your continued success,

-jl-

To the experts out there: Mom and Pop bought land and built park over past 30 years. Southeastern state with 30 acre park with 37 sites; 70 % occupied; Average $300/month rent; 28% expenses. 20 are owned by tenants; 5 by the park. Very clean park with good roads; each site w septic tank. Cap of 10%.

If I work out the numbers, looks more like $380k value. They want $575K. Any “bump up” value to how the park has been maintained; acreage; proximity to large city? When do you adjust formula to take in some of the more subjective qualities?

To me looks like great park, but somewhat overpriced? Reasonable cash offer?

Thanks

25 x $300 x 12 x .6 (I think a 40% expense ratio is more likely) x 10 = $540,000. While I like your figure of $380,000 a lot better, their number is not insane based on a 10% cap rate. But what’s the upside here? I know you can fill 10 lots, but that’s very capital intensive. Can you push the rents based on the market rent? If there’s not a lot you can do to boost the NOI, then $380,000 gives you a return of maybe a 14% cap rate – that’s probably appropriate for a smaller park with limited upside.

But the bottom line is that they’re not crazy with their price – but you may be crazy to pay it if the upside is not there.

Jefferson Wrote:


I’ve occasionally seen used versions of various

books/courses for sale on eBay. You may want to

program an alert on eBay to notify you the next

time someone posts something for sale of Frank &

Dave’s or Ray Alcorn’s. Of course, time is of the

essence, and you may want to just ‘pony-up’ and

pay for new and get on with it. (:P)

To your continued success,

-jl-

Purchased. Thanks