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Where are all the Mobile Home Park Investors?

Discussion in 'Real Estate Investing' started by Major, Jun 20, 2017.

  1. Tammyanne
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  2. Tammyanne
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    I am taking an udemy online course "An investor going global",
    they were mentioning how similar to "airbnb" but people will be renting out their land for mobile homes etc...stay 1-3 months and move on..is this not already happening? I guess it's not like the typical caravan park it's joe shmo has land and he or she could rent it to prospective people whom have a camper etc..have you heard of this? Property investor...
     
  3. Major
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    Major Luck is Man-Made Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    Yes, I see these type of deals all the time. I passed on a park, a little while back, in Rural VA for a 72 lot park, with 67 occupied lots (lots with a rental unit) for $800,000 with lot rents of $225. So the math is $11,900+ per occupied lot with a gross rent of $180,900 annually. After vacancy and operating expenses, comes to about $65,124 NOI. With a down payment of $160,000, this park would show a cash on cash return of 40%.

    Sounds great right? However, the park is in the middle of nowhere, the utilities are private with no way to expand or connect to city service. The local economy and job market is heavily driven in manufacturing with a MSA of only 12,000 people. The issue was the location, area economic factors, and inabililty to fill vacant homes in a less than thriving job market and and even smaller population.

    It takes the same amount of time to manage a 10 unit park in your back yard as it takes to operate and manage a park 5 states away. I stay away from AL, LS, MISS, FL, CA, for economic or landlord/tenant policies (something else to take into consideration).

    Why not look in a better economic area?
     
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  4. Major
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    Major Luck is Man-Made Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    No I have not. I know there is a tiny market where people will rent out to a RV or tiny home on their land. I see a whole lot of issues with the model you describe. Sounds like a MHP with only one unit. I highly doubt there will be a large demand of people who own a home and continually move the home, rather than move to a new home?
     
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  5. IGP
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    IGP Gold Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    I'm just north of Atlanta, so that's where I looked originally. There just weren't any close to me for sale. and those were just the closest ones.

    Thanks for the reply!
     
  6. IGP
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    IGP Gold Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    @Major do you find that 36% is a good estimate for vacancy and operating expenses? Just crunching some numbers here and that's the missing piece that I am not sure about.
     
  7. CPisHere
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    CPisHere Silver Contributor Read Millionaire Fastlane I've Read UNSCRIPTED Speedway Pass

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    LS? You mean Louisiana?

    I assume Alabama, Mississippi, Louisiana & Florida don't have the economic conditions you are looking for, souldn't that vary quite a bit depending on the area of the state?
     
  8. Major
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    Major Luck is Man-Made Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    Very true. It's based again on your main goal. I know the customers I target and look for decent sized MSA that is growing or in the path of progress from surrounding larger cities. But some states are not landlord friendly and not worth my capital or time. Especially when viewed as bigot slumlord devil worshiping MHP investor.
     
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  9. Major
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    Major Luck is Man-Made Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    No. I look at 20% to 15% vacancy based on the size and cindition. Banks use 10% vacancy. However, if the get a whiff that the park or buyer can't perform over 10%, no dice.
     
  10. WJK
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    Thank you for noticing. Yes, I own a mobile park. Yes, I own almost all the mobile homes in my park. I have low to moderate income tenants -- the only collection of affordable housing in my community. Yes, I also have the only self-service Laundromat in my community -- it is used by my tenants and the whole community. Yes, I designed it and built it -- it is handicapped accessible. Yes, I have a several full hook-up RV spots -- the only ones in my community.

    Yes, I'm a very busy girl. It's not strictly 'fastlane,' but most of it is passive income. It's all nitch marketing moves.
     
  11. WJK
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    WJK Gold Contributor Speedway Pass

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    You're mixing oranges and apples. He was saying vacancy AND operating costs...
     
  12. Major
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    Major Luck is Man-Made Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    For operating cost I use 40%-60% based on the condition, occupancy, and estimated amortization period and interest for my debt service. On parks with a value added play or not turn key, the percentage will be high at purchase and decrease as park becomes more efficent.
     
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  13. WJK
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    That percentage depends on IF you are renting spaces or IF you own the mobile homes. Also, IF you are maintaining the roads within the park. And then road maintenance costs depend on your climate.
     
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  14. Major
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    Major Luck is Man-Made Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    Very true. There are many factors.
     
  15. EAChi
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    It's been hard to find good information on it but how do you operate differently after the SAFE Act? I've been scouting the local MH parks for some good deals and am hoping to make a couple flips.
     
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  16. WJK
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    I never thought of a mobile home park as a "flip." I have flipped apartment buildings, SFRs, and some small commercial buildings over the years. I guess you can flip just about anything that you can buy right.

    I'm just not sure how liquid a mobile home park would be. And what would the market period be? What about the financing? Are you expecting the cashout or are you going to carry the paper? (That was a disaster for us when my parents sold and they carried the paper. That's how I ended up coming to Alaska and taking ownership in my park.) The real question is -- how deep is your investor market in your target area?
     
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  17. Major
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    Major Luck is Man-Made Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    You can as an individual conduct up to and no more than 10 installment sales. After 10 you must be certified. The way around it is a lease purchase (rent to own) or as the I learned from Frank and Dave, is a rent credit. Rent credit meaning you give a percentage of the rent as a credit toward the purchase of the home on an agreed upfront price. Make sure you put i in, on an form of agreement between you and tenant in bold, upon default and/or non payment " tenant/note maker willing gives landlord/note holder mission upon default and/or breach of contract". This will save you alot of time and heart ache with judges whom are unfamiliar with mobile home (due to it classified as personal property and the liberal judges who want to protect tenants from us evil landlords).

    @WJK you have a MHP in Alaska? Would love to hear about that and how you deal with the heat and snow. I visited Juno and Anchorage earlier this year and it was beautiful.
     
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  18. Major
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    Major Luck is Man-Made Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    You can easily flip a MHP. I just closed on my small park mentioned in my first post. I purchased it for 215k fixed it up and sold it three years later for 417k. Along with the 31k avg cashflow, the property did very well and with only 25k down.

    Another park I have was purchased in June 2017. I purchased it at 1.7m with no money down (actually walked away with 115k from closing) and a seller held second. First position loan for 1.15 and seller held second for 550k. Seller fell into desperation and needed cash quick instead of the 5 year note (very entertaining atory). Any way after some negotiation, he accepted to take a 200k lump sum. A 375k discount! I called a few investors and brokers about wanting to sell the now efficent park. I have multiple offers at 2.5m and up.

    So yes, you can turn a park but it is longer term. Where do you create value? Operatate the park to its peak then sell? Add rental units? Increase lit rents? Cut variable cost? Wait for a large near by development to finish construction? How do you justify the increase in price to make your profit.

    These things take more time then sfr or apts due to the nature of the business. It takes 4 months on average just to fix/clean out the previous owners tenants that are hindering your park. Make it 6 months if gang related tenants because they move from trailer to trailer. Then you have to flip the homes or remove them from the park and fill that unit with a quality tenant.

    These parks are becoming very hard to find due to investors barrowing cheap money and a lack of inventory on market.
     
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  19. WJK
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    The number of installment sales depends on the state where the property is located. The laws here are based on the number of sales per year. That's easy for me. I buy owner carried trust deeds on the side.
    Yes, my mother sold off some of our mobile homes on contract sales when she was alive. (I was in Los Angeles still working at my career.) Yes, I had to repossess almost all of them through a lawsuit. It's a good thing I went to law school.
    And I'm in a rural area where I appear before the same couple of judges, who have watched me for years. One judge was pretty pro-tenant when she came on the bench, but after all these years, she has changed her tune when it comes to me and my cases. She watched me help a lot of people over the years and be kind even when I don't have to.
    I rent my mobile homes. Here in Alaska they've changed the eviction rules for mobile home parks concerning homes owned by individuals which are located in parks. Evicting a mobile home along with their owner is almost impossible now. So I own all except for 2 of the homes in my park.

    YOUR QUESTION ABOUT THE COLD...
    We work all summer to get ready for winter. Painting and staining wood is a really big deal. Things rot here in 3 or 4 years that would take 20 years in the Lower 48.

    All of our pipes are insulated and heat taped. Each unit has a switch inside the unit for that heat tape that we make sure is turned on when it gets down to 0.

    Our skirting is critical. Every fall we inspect every mobile home for any damages. A pinhole can let in enough cold air to freeze up a unit. We use PEX for our plumbing. Other types of plumbing can freeze up and turn brittle. Opening a skirting in the winter is almost impossible some years, depending on how much snow we get and the how cold the winter is.

    I own a small community water system that services the park, and our water pipes are 10' underground. We're very careful to make sure that we protect that system.

    Over the last few years, we have replaced just about every window in every unit. Standard mobile home windows don't get it here. I have spent about 100K wholesale on double pane; argon filled windows.

    Almost all of our units have arctic entries -- enclosed unheated porches -- as a buffer for the winter's cold.

    My tenants are all low to moderate income people, so I include the utilities in my rents. I have the only "bank" of affordable housing in my community -- I have 40 rentals (besides the senior center which has only 6 senior units), the only self-service Laundromat and the only full hook-up RV spaces.

    I can tell you more... if you are interested.
     
  20. Major
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    Simply amazing the amount of prepp you must endure! I'd imagine you have a wait list of tenants wanting to move in due to your property being one of the only lower price housing in the area. Do you have a manager onsite? Any problems with RV's leaving in the night to no pay space fee? What about a power outage during winter? Do your tenants have generators? Do you have to plow the park on a weekly basis?

    I only ask because I find your story fascinating and try to learn from other professionals in our niche. Thanks for the replies. There is some very pertanite information in this thread.
     
  21. WJK
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    e
    I do my own management. I have a commercial building on the highway at the mouth of the park that I use as an office. I keep regular business hours 5 days per week -- 8:30 AM to 2 PM
    Roads? Our roads inside the park are private. I own a road grader, plow truck, 2 backhoes, a bulldozer, and a small dump truck. We plow as necessary in the winters. I have a lot of acreages here. We have a lot of woods as well as the developed parts.
    Yes, I have a low vacancy rate. I have one vacancy right now, and I'm showing it at 5 PM tonight. I've gotten 3 calls in the last couple of days. I often turn down prospects due to their credit or background. And my records of past tenants go back a bunch of years. I know if they screwed up here before. I'm kind of like an elephant.
    I almost always have a credit card on file, so people don't generally leave the RV spaces without paying. I make sure that they pay in advance. Also, there's only one highway that leads off of the peninsula. It's hard to be a bad guy here without some notice.
    Power outages in the winter can be a problem. No, my tenants don't have generators. The biggest problem is the power for the well. When the power goes off, we have about 20 minutes of water left in my small community water system. I'm a licensed well operator.
    I went to law school many years ago, so I do my own legal work. I have a good relationship with the district judge, who almost always hears my eviction cases. She knows I'm a straight shooter who cares about people.
    As far as maintenance management goes, I'm pretty much a one-man band. I manage the scheduling and materials for the maintenance work. My husband is the foreman. He can fix or build anything. He just can't manage the whole maintenance operation. SO we work as a team.
    We live in the woods on the 10 acre parcel behind the park. I'm supposed to be retired, and I work a lot. Running this place is Real Estate 101 for me. It keeps me very busy, but it doesn't tax my brain much. I brought my mom home here when she was frail elderly. I stayed. This wasn't what I wanted at the time. I was already Mom's business partner. My parents bought the park parcel in 1987 and I've added more parcels to the holding.
    It's worked out OK for me. I met my husband here and we married when I was 50 years old -- 14 years ago. We have a good life together.
     
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  22. Major
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    Major Luck is Man-Made Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    Very informative. Sounds like you have a great system in place with a terrific partner.
     
  23. WJK
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    WJK Gold Contributor Speedway Pass

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    I missed my mom, but my husband and I have made a good life together. It's not the classic Fastlane life. It's a good solid base.

    But, I do have a couple of other side things going. They are a lot more exciting than the mobile home park. I'll have to start a progress thread about my gas/oil subsurface lease that I own, and I'm looking to develop, down the coast. Now it just a right to develop and the prospects for a producing well coming in are good. But, if I'm successful, it would be cool to own a gas/oil well or two...
     
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  24. Geekour
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    Nice thread, great read will keep following
     
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  25. Major
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    Major Luck is Man-Made Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    Wow. Would love to read about your subsurface lease... Please keep me in touch. Have always wanted to learn about water basin rights as well.

    I will have to disagree with you on the mobile home parks not being exciting though. Everyday is completely different. Maybe the culture down here closer to the equator. Thanks for the reply's on this thread. Hope to hear more from you!
     

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