Having come out of the MHP boot camp a few weeks ago I have been aggressively looking for my first park. A few cold calls and working on a mailing.
I’m doing a walk through this Friday for a small 19 space park about 30 minutes outside of Tampa. It’s in a fast growing area where affordable housing is becoming increasingly difficult to find. The owner is asking too much but he lives in Oregon and needs to sell it.
He’s asking $480K.
17 lots rented. One lot vacant and the other has an older home on it.
4 are lot rent only at $215 per month. Based on my research this is almost $90 below the local market. (Parks within 2 miles)
The rest are park owned homes.
Several very long term tenants (15 years plus).
Nice location near main highway and newly sub metered to each lot with City water and sewer.
I think I can get this park for $400K. Is this deal worth it keeping in mind the upside potential for the lot rent? I think I could go to $250-$260 lot rent immediately.
Thanks for any advise.
Ed
How old is the park and what size are the lots? Are the lots big enough for 16x80.
Ed,OK, let’s work backwards on this deal. You’ve got 18 lots with homes on them (once you’ve renovated them) and the lot rent is, you think, $300 at market rents. So the potential value is 18 x $300 x 12 x .6 x 10 = $388,800. And that’s AFTER the rent raise. In the meantime, you have to renovate a bunch of homes (maybe $5,000 per home) and then invest all that time, energy and risk for no upside at all.That deal just makes no economic sense – except to the seller, who will be laughing all the way to the bank.This is very typical of a Florida park deal, That’s why we don’t buy there – the pricing makes absolutely no sense. You can buy a similar park in the midwest for around $180,000.Just trying to keep you out of trouble.
Thank you Carl and Frank. I do believe all the lots would fit the 80’ trailers. Based on the pictures most look to be 80’ or close to it. I will know better after my walk through on Friday. That’s a good point for me to look into.
Frank I just want to make two points and see if you come to the same conclusion. Since it’s city water and sewer and sub metered why are you using the .6 variable and not the .7 in your calculation? Especially since the location fits all the criteria and then some.
Also I’m told the homes are all in good shape and have no deferred maintenance except for 1. They are older but in good shape. Renovating should be minimal. Looking into that further during the due diligence of course would give me the opportunity to renegotiate if needed.
The problem with the Midwest is that I live in Florida. This park would be 30 minutes from my house which seems like it would make it much easier to deal with evictions and any other issues that might arise.
Your candid input is much appreciated as always!
Frank runs .6 on smaller parks due to inability to maximize the use of economies of scale regarding expenses. So free lot rent for a greeter/manager in a small park is a larger percentage of your gross than in a larger park etc.
Ed, congratulations on aggressively looking for your first MHP!!! Way to go!!!My Husband and I own and manage two MHPs.We have a different business model from Frank’s business model. Frank is obviously very knowledgeable and very successful (way to go Frank).Our business model is more of a ‘hands on’ business model versus Frank’s business model of more of a ‘business leader / hands off’ approach.Frank does not mind buying MHPs that are physically far from his residence because he uses Managers/Greeters. This approach has made him very successful.However, my Husband and I like being physically close to our MHPs. It allows us the ability to go there when there are issues or when we need to meet contractors.We do not have an ‘office’ in either MHP. We agree with Frank that just sitting in an office does not necessarily ‘add’ to our bottom line.However, being able to physically go to the MHPs when needed does help us a lot.One of our MHPs is 30 minutes away and the other is 1 hour and 15 minutes away.We wish you the very best!