This may get me banned, which is why I won’t name any names, but hopefully the monitor of this site will see the benefit of this post and allow people to read it.
The late Sam Zell showed us that mobile home park investing is a solid trend for building investment portfolios. But it also creates an environment for possible misconduct.
I have been investigating the history of the park I live in. It was a family owned park for decades, until they sold out to an “investor.”
That original investor filed an LLC in our state that he operates the park under. He also made a second filing on the same day under a slightly different name as an incorporated holding company to sell off shares to other investors.
On the date of the sale, this investor signed a mortgage equal to the purchase price. He signed as “managing member.” Research has shown that a managing member can own as little as 10 per cent of the LLC.
I did a search of public records in our county where the park is located. Over the nine years since the park was acquired, he has taken out a total of three mortgages for millions of dollars. You must look not only for mortgages, but UCC filings too that do not come up as traditional mortgages on searches.
We have been told that most of the park’s rental income goes to pay these mortgages, which is why there is no money to repair anything.
As most of you already know, an LLC has an accompanying Operating Agreement, which identifies the actual owners of the LLC and what percentage they own. Unfortunately these are not public record. There is no way to get a copy unless you are a member of that LLC.
In a subsequent lawsuit, this managing member’s office admitted that investors own our park, not just himself as he had pretended to for years.
There are no “Satisfaction of Mortgage” on file in our county to show that when a new mortgage was taken out, the old one was paid off. Maybe its different with commercial loans than residential ones.
The lawsuit was dismissed by the court, so we did not get to fully identify who the owners were.
So it appears this managing member (who may own as little as 10%) has pretty much free rein to mortgage properties over and over, as well as sell off shares to investors. My question is: where did the investors money go when they bought in over the years, because the mortgages are still being paid out of the rental income?
And these chunks of money were definitely not put into repairing or improving the park. So where did the money go?
If I get banned, I sign off to this valuable forum with the hope that a message of caution made its way to some of you to look closely into your investments and who has control over your money.
You can research LLCs and corporations online by going to OpenCorporates. Search by company name or officer name. If you search by Officer, all the companies that person is listed with will come up.