Purchase Contracts, MHP Rules, Deal Analysis, Financing and more

mobile home university
1

Okay, I just made it into the town I am looking to buy a mobile home park in. I am looking into meeting up with a lawyer tomorrow. I would like to see what different purchase contracts people use and also what different MHP rules people use to run there parks.

A quick run down on the park I am looking at is a small 22 lot MHP.

I called the city and spoke to the people in the planning and zoning and they said that it I can bring in and out mobile homes but I can not expand the MHP. He wasn’t to fond of MHP.

The MHP currently has 21 Mobile Homes

13 on lot rent $120

6 Park owned $325

2 abandoned.

Rent hasn’t been raised in over 10 years

Competitions Lot Rent $200~215

I plan on raising the rent instantly to $150 upon aquiring the MHP and then slowly increasing the rent $15/Year until I get it close to my comps

Restraunt on property

Rent $1,600

Maintence free 10 year locked in renewable lease on its 2nd year

Located in the major metro area but on the declining side.

Demographics via bestplaces.net since 2000

Metro

550k population

11% increase

Zip Code

25k population

11% Decrease

I talked the deal to go in contract seller financed for 150k

50k down and 100k financed for 4 years at 4.5% interest

Net Operating Income

61k

Expenses

28k

Gross

33k

I have until christmas to complete me due dilegence period and expect to close by New Years.

I read and reread through the 30 days of successful due dilegence and now I am putting it into practice.

The disc that came with the book I can not use as I this HP Envy M6 I bought has no disc drive.

Also, I prefer to get a loan through traditional means via bank.

I am easily preapproved of home loans over 250k with the income I currently have yet commercial property is different on how the bank will determine if they will write me the loan.

Problem with getting this financed is that it was ran by a chineese couple in which they mostly collected the cash themselves and didn’t manage record keeping. The husband has passed about 2 years ago and the wife finds it difficult to manage due to her not being profecient in english. The tenants are not on leases either.

Can I get the bank to finance maybe the sale of the land to me, the assessed value or what can I do to get it financed traditionally and possible come out of pocket less or extend the loan term longer then fast ammortization.

Also, the park being in a different state and a 6 hour drive from my residence how do I find a good accountant and lawyer? Also, should I use a property management company to get things on there feet or try to continue to use the current person who collects the rent for the owner and gets the parked own homes rented out?

These are all different things that concern me at the moment. If you can give me different opinions on the different aspects that will be great.

2

OK, that’s a whole lot of issues. Let’s go over the key ones. The value of the park is roughly 19 x $120 x 12 x .6 x 10 = $164,160, plus the vallue of the restaurant plus the value of the 6 mobile homes. Anyway you cut it, when you raise the rents to $200, the deal has compelling numbers.

I would use the seller financing, but try to get him to extend it to at least 5 years, or better yet 7. Get it with no pre-payment penalty. Then push the rents immediately, clean it up, and start professional-grade accounting on the statements. When you have about a 6 month track record of statements, try to get a bank loan based on the new professionally managed property. You’ll get a much higher appraisal, and will end up with a much better loan. If the banking world collapses within that time period, you have enough time left on the seller carry to hold on until banking comes back.

Do NOT use a property management company. You can do this yourself. This is a very easy type of park to run, and will only take a small amount of time on your part, assuming you can find the right manager on-site.

3

Thanks Frank,

I originally came on her to request different peoples purchase contracts and a list of park rules but as I started to get into typing I got more in depth. I am a natural writer so once started I can just keep going.

Can a few people send me there purchase contract and park rules so I have a good guideline starting?

My email address is

Tommyleeeig@yahoo.com

After I acquire the property I am going in blind. I do plan on getting more books from Frank and Dave’s collection as I can see even this due dilegence book is extremely valuable but need to reserve my funds atm as I am using pure savings and have no other investments. This will be my first asset.

4

Id like to add a couple of things. You didn’t mention anything about what type of utility systems you are on.

Also I see a fundamental problem with your thinking. You have a 500$ computer yet you will not spend twelve dollars for a portable cd drive

You are looking to buy a 150k park but won’t spend a few hundred bucks on the home study course that has everything you are asking for I believe.

Don’t look at the books as an expense but as investment. You will learning something in there that will pay for itself when and if you buy this park.

Good luck and keep us posted on how this works.

5

It will be on city water and electricty. I know the electricty is submetered out but I believe the water bill is not. I have copies of the electric, trash, and water bill from the utility compny

Water bill runs close to $350/month

Trash is $365/month

Electricty is $80/month ~ Street Lights

I actually went out today and bought me a portable cd drive and a LLC manual and forms cd.

I do plan on buying the home coarse study as I realize how important the manual is.

My current situation is I have about 40k saved up and I have an open equity line of credit with my bank for 18k.

So that puts me at 58k of tangible cash. The deal I am working will require a 50k down payment thus leaving me 8k to work with my due dilegence. This will be my only income producing asset once completed.

My only other form of income I will recieve will be my VA disability check that is primarily spoken for.

I am being extremely frugal with my money as I know I will be cutting it close but plan on doing a complete due dilegence.

With all things considered I know I plan on getting the home coarse study guide and the management guide but don’t want to until I close on the MHP and can better assess my finances.

6

I’m new at MHPs myself, so I may very well be missing something here…but I think in your original post you meant to say:

Gross Income

61k

Expenses

28k

NOI

33k

If that is the case, and you are going to finance $100k in 4 years…you will be making approx $26k a year in loan payments…that only leaves you $7k a year in cash flow, which is less than $600 a month. Even raising all rents by $30 and filling the empties…that only brings your income to around $1200 a month.

I’m planning on getting a property under contract by the end of the year…looking at three right now, trying to narrow to one. So I’m interested in seeing how this process goes for you.

Thanks,

Doyler

7

Yeah the net monthly if anything won’t be much because I am consolidating something that should pay for itself in 10 years in 4 years. So I will probably be injecting some of my personal finances into this park while I pay it off. I plan to keep about 10k in reserve just to be prepared for any set backs.