We are in the due diligence period of purchasing
our first park.
Congrats and welcome to the MHP business…
We went out to look at it and
there are several things that we and the home
owners need to clean up. My question is…what can
we “make” them (the home owners) fix? Paint homes,
fix broken windows, junk in their yard that also
spills over onto empty lots? What is the best way
to go about accomplishing this? Also, there is one
home that used to be there, but it looks like it’s
being demolished by hand. What should we go back
to the seller with…money off agreed price, or he
has to remove entirely before closing? Thanks
Much said here- and the answer is you can do all of this but it will take some changes, some rules etc…
You will write new leases, and new rules as soon as you buy the park. So you will put in writing some teeth, so you can get some things in the park looking a bit better. Now let me be clear, you can not write a rule, then post notices. In most states there is a period where you give the rules, you might even need to post the rules, and after 30 or 60 days, you can enforce them. There is a process to that as well, post notices, you might have to post a notice to quit to get the tenant to court.
Lets go to the painting- Our rules say, if a home CHANGES HANDS, so sells, the home needs to be inspected and approved prior to a new lease being granted on the home. So at that point, we will say the home needs paint. In some parks if it is really important, I will offer to buy the paint for the tenant, and they need to paint their house. We have had limited results. I have seen parks enforce these rules midstream, without ownership changes… and it gets pretty ugly with backlash from the tenants.
Now to the home being removed. You might tell the seller you want some money held back in escrow for the home removal, and if it is not done in xx days, the money can be used to hire a contractor to finish the removal.
Also- if you valued the park on that income- you could tell them you need a price reduction equal to the CAP value of the NOI that was said to have been produced by that home. I would guess they stated a certain number of occupied lots in the contract- any deviation from that in a downward motion would create a situation where I would ask for that…
good luck- keep us posted…