Posted by Berno on June 20, 2006 at 09:42:19:
City water/sewer and natural gas. Good points made in your last paragraph, I will definitly use them!
Advice on MHP Purchase! - Posted by Berno
Posted by Berno on June 19, 2006 at 12:54:25:
Currently looking at a 12 lot MHP on 3 acres. Asking price is 70k and owner would probably be a bit flexible and carry some of the purchase price on terms.
5 older parked owned homes rent for $250/each
2 owner-occupied homes with lot rent of $100/each
1 vacant parked owned home
4 vacant lots
Currently looks like $1250 + 200 for $1450/month, $17,400/year gross
Expenses, as given, total about $9500/yr (about $800/month)
I would manage the property myself and obviously have ideas to improve the MHP if I aquire it (separate water meters, bring in homes etc). I would probably consider doing Lonnie deals on the current park-owned homes to lower repair costs etc…
Does this look like the numbers might work? I wouold like to make an offer if it looks good and start the DD process. Any help picking this apart would be great. Thanks!
-this would be my first park
-I own and have read Ray’s Dealmakers Guide to MHP and both of Lonnie’s books
Re: Advice on MHP Purchase! - Posted by Sailor
Posted by Sailor on June 19, 2006 at 16:50:07:
I agree that this warrants further investigation, but note that the expenses are high. My response isn’t totally relevant to your situation, but here is a recent post I made to someone considering a mhp purchase:
http://www.creonline.com/commercial-real-estate/wwwboard5/messages/20293.html
I recommend you research the Archives for “estoppel.” Here is a link to a sample letter:
You’ll need one from each tenant prior to closing (though @ this point it is premature). Fist you need to speak to the Health Dept. to see if you can replace existing units & bring in others to fill vacancies. Good luck!
Tye
Re: Advice on MHP Purchase! - Posted by rise2it (VA)
Posted by rise2it (VA) on June 19, 2006 at 13:06:51:
Numbers look workable, but here’s a few ‘newbie’ tips for you.
(1) What kind of tenants are there now? With the owner’s permission, I’d do a quick ‘meet and greet’ to feel them out. (Preferably without the current owner present.)
They’ll spill the beans about each other, and also about maintainence issues: “He promised to do this and never did”, “Bet he didn’t tell you about this, let me show you”, etc.
You should also get a pretty good idea of which ones are ‘keepers’, and which ones are going to be ‘hitting the road’ within a month of you taking over.
If the current owner has ‘let things slide’ and ‘overlooked’ a lot of what they do, making late payments, etc. - then you can plan on losing some. If the owner rented to anyone with a pulse, you’re definately going to lose some.
(2) Stop and talk to ‘neighbors’ of the park. They’ll be happy to tell you about any previous ‘troubles’ there.
Trust me, this kind of information will be invaluable as you negotiate your price. You’ll probably also catch the seller in a more than a few ‘white lies’.
(3) A large part of your numbers, and the park’s value, will be determined by WATER. (You mentioned seperating meters, so I assume YOU are going to be paying the water bill.
This is the one area that can KILL YOU if it’s done wrong. You need to get down to the water dept. and get the last year of bills on this place. Secondly, you need to find out what kind of ‘adjustments’ the water dept. is willing in make if there’s a leak (and there will be).
I’ve got towns here that have adjusted bills by taking 80% off. I’ve got towns here that will only give one 50% adjustment per LIFETIME. There are towns here will not give any adjustments, period.
One or two leaks (or stupid/mad tenants), and it’s not hard to end up with a $1000+ water bill.
Too late Sailor… - Posted by Berno
Posted by Berno on June 20, 2006 at 08:58:00:
I already read your post that you refered me to. I read all of your posts of course!
Thanks for the response. I will ask you though, why does the health dept. dictate if you can replace your trailers? That seems like an odd group to be doing that, although I’m sure that there is a good reason. I figured the City Zoning/Planning folks handled that.
Do the numbers look decent as it sits now (if everything is accurate)? Didn’t know what a good price to settle on would be. I know it has upside with the vacant lots (and all lots are good size for bigger homes to be brought in), seperating meters, etc. Just wanted to see if you experienced folks thought it looked decent now and warranted a possible offer and dud dilligence,
Re: Too late Sailor… - Posted by Sailor
Posted by Sailor on June 20, 2006 at 09:11:08:
The environmental folks @ the health dept. determine whether or not an existing septic meets their approval; e.g., in my mhp I have 4 mhs on only 2 septics. That is now a no-no, so if one burns down I can’t replace it w/out installing a separate septic. Some of the larger mhp investors w/no longer buy parks on septic. Here, I like septics because a new sewer hook-up has skyrocketed to 12+k. Note that septics are sized by # of bedrooms, so you may not be able to replace a 2/1 w/a 3/2.
Your numbers are fine as a starting point–there just are enough of them on which to recommend an offer. When you do make an offer (deducting for junker removal), make sure you have 2-3 weasel clauses (e.g., approval of spouse, lawyer, cpa; satisfactory inspection, survey, etc.). I also like to give seller notice that re: his performance “time is of the essence.”) Remember, that once the offer is accepted, there is still room for negotiation if you due diligence turns up new info. Find out the seller’s problem(s) & offer a solution that w/work for all parties. Good luck!
Tye