I have had good success sourcing leads via cold calling. It just takes a lot of time. Mailers have had some success for me, but not much. I’ve also found it just takes persistence. I touch on pocket listings below, but if you listen to many of the larger operators in the space talk, this is how they find most of their deals. Pocket listings are probably the most efficient way of generating ‘off market’ deal flow as the broker puts in the work and than reaches out once they know the seller will transact.
Over the last 6 months I’ve dug up leads via cold calls where the owner went under contract at a much higher price than I was willing to pay (and I was confused at how anyone could get to that valuation) only to find out 60 or so days later the park fell out of contract (price was way too high) and my persistent follow up lead me to be back in the running on the deal once it fell out.
To me, this is the hard part of off market deals - dealing with owners who, rightfully so, are trying to maximize their gain but don’t understand when they are 1) accepting offers that can’t even get financed and 2) not qualifying those who are trying to buy their park only realizing they are tying them up to flip a contract. There’s nothing wrong with contract flipping, but many people tie it up and can’t actually flip the contract as they tied it up at a price that makes no sense. I’ve run into multiple deals which are up for assignment that I had already passed on. When I chatted with the assignor to figure out how they came to their contract price, they just took T12 income and capped it, not realizing they were capping a mixture of TOH income, POH income, RTO/RC income, etc.
Regarding brokered and fully marketed deals- I’m curious what types of returns are you targeting? I find the brokered deals that don’t have much in the way of capex needs and are on public utilities generally have “full” pricing, but fair pricing and I look at it this way - if someone will purchase at $xx, that’s the market price and great intel for underwriting my deals I find via cold calling and underwriting my exit cap rate. Also, if you’re trying to find a high volume of deals, you can take the tact of offering on marketed deals at pricing you believe are fair. If you asking brokers, they will generally tell you the price you are offering is fair, but they know they will find the one person out there who will pay above market for the deal even if it takes an extra 3 months to find that person. It never hurts to put your offer in at the price that works for you, you never know if the deal will come back around to you. It also helps you develop a relationship with the broker - especially if you close. As than they will start showing you pocket listings which will hopefully have less competition and/or better pricing.
I believe paying market isn’t necessarily a bad thing, it is totally okay as long as you are fine with the returns. I also believe that as the mom and pops who currently control the majority of the MHPs retire and sell, it’s going to get harder and harder to find off market leads in the way that has been the norm over the last 10-20+ years. As the space attracts more institutions and professional investment firms, and if these firms only sell with brokers to maximize their price, people will begin having to rely more on brokers. This may not be a bad thing necessarily though, because pricing may go up, (which isn’t good), but property financials and record keeping as well as deferred maintenance issues will get better. It might not be as good for our pocket book when buying the deal, but it will be good for the asset class as a whole, the reputation, and our ability to finance the deals. Better record keeping, less deferred maintenance, etc. could lead to better rates for financing.
Sorry for the long rant but I think talking deal sourcing and pricing is a great conversation to have.