Thanks for the replies thus far. Interesting how the replies have come in low with regard to the value of this deal. I appreciate the attempt to breakdown the value of the land and the the MH’s. Our approach is the same regarding not wanting to pay for potential.
Several questions were asked regarding the reason why there were so many empty lots. Honestly I haven’t uncovered that yet. But here is what I have at this point:
The owner is out of state and no one is running the park. Atleast one of the current renters rarely pays and it seems like it is too difficult for the owner to take action.
In addition to being out of state he is not advertising those empty lots, no signs and no adds.
Now thats what I’ve been told by the Listing Agent ??? Of course, I have to dig up the bodies to discover if there are other issues.
Yesterday, I received the paper work from the health department on the 12 septics. It was just the lay-out drawings. I’m not sure yet when they were last inspected.
I chatted with the listing agent last night. I told her I didn’t think the numbers were going to work out to support the asking price. I fished for an answer as to how motivated is the seller. She relied that the seller was pretty firm on the sell price. That doesn’t add up??? If he’s not here and he has problems with the park you would think he would be willing to sell quick. In addition, he has owned for 13 years so can’t have much invested.
Let me start by saying I’m fortunate to have found this site.
I’m always on the look-out for a good deal. Look-out is the key word here, for one reason or another like many I rarely pull the trigger on the deals I find.
I’ve ran across a small park and from what I’ve read here and my DD I’ve performed I believe it to be a potentially profitable investment. I use the word potentially because I have never bought a MH and certainly not a small park. I have a rough estimation on the value of raw land in the area but this of course is not raw land. There are 12 spots on 7 acres of land. So 12 power hook-ups, septics and 4 wells certainly add to the value of the land. With the deal comes 3 SW’s, 2 of which need minimal repairs 1 needs major over haul. There are 2 private owners renting lot space that leaves me with 7 empty lots.
MH rent is $300
Lot rent is $125
Total income is $1150.00
Sell price is $120,000. I THINK… I can break-even at this price until I get some ads out there and get those other lots rented. This is a big I THINK! Again I’m new at this so I’m certain I don’t have all the answers and I expect there are other expenses right around the corner. I’m responsible for garbage pick-up, but thats it… I THINK. I know I’ll have to put some money in this and thats ok, I just want to make sure that my cash flow pays the bills along the way.
Specifics that I noticed that stand-out from other post that I have read here:
Negatives…
no pads
no paved drive - gravel
no park manager
only 4 wells (problem - potentially 3MH per well ???)
Positives…
7 acres >> each lot is a .5 acre
nice land, mature trees
each MH has nice deck and skirting
city water is now available at the street
surrounding area is clean, small town 1.5 miles away
What are the Red Flags???
Would you run from this or is it a no brainer???
I read of MH being bought for $2,000 and sold for 10,000. I have seen parks this size sell for 200,000. I know this is dependant on many issues.
I don’t think I can steal this based on my discussions thus far so, its time to make an offer or rack this up to another property I like but not enough to buy…
I come up with a of $86,000. $74,000 for the lots, $10,000 for the two good homes, and $2,000 for the bad home. Also, $86,000 at 8%, 20 years is a payment of $719, which can be easily covered with the current payments.
As for the DD, why are there so many lots empty: are the septic systems defective, well have enough capacity, pipes ok, etc… Talk to the town office, code enforcement officer, the other parks in the town, the current tenants, etc. Find out the history. Dig up the dead bodies. Also, you are going to need $20,000 to $30,000, to get more homes in the park, fix any problems you find etc…
Before I spend any more time, get the park under contract for $86,000 subject to DD.
Re: Do I pull the trigger on this park - Posted by Freddy (OK)
Posted by Freddy (OK) on December 20, 2005 at 12:19:15:
The first alarm I see in this deal is the park is over half empty. My first question is why? I would check with the local DEQ (Department of Environmental Quality) for possible violations first. They should be able to give you the low down on how the septic systems are and of any problems they have uncovered in the past.
Another thing to consider is you have to evaluate the dirt as a separate entity from the homes. I would value the homes as what they are worth wholesale minus the repairs.
You still have a lot od DD to do on this one and you want to make sure you pay a price for what the park is worth in it’s current condition and not what it will be worth in the future. The future is your profit and I sure wouldn’t give any of that to the seller when you close.
According to the current lot rent, I think it is over priced. Even filled to capacity, at the current lot rent I come up with a rough value around 90K for the dirt. Maybe someone else can shed a little more light than I can but I think everyone is going to tell you to dig a little deeper on this one.
Re: Do I pull the trigger on this park - Posted by Sailor
Posted by Sailor on December 20, 2005 at 09:35:44:
One of the difficult things to learn is to buy on VALUE, not POTENTIAL (though the latter is certainly a consideration in your purchase). You NEED to take Tony & Scott’s next Boot Camp to learn exactly how to evaluate a MHP. If I had taken that prior to my MHP purchase I’d have save LOTS of $$$ + hassle. Good luck!
I’m sure you’re correct, regarding the bootcamp course. I hope to catch one this summer if offered. I totally agree with the issue of buying based on Value. I expect the potential is high on this park but I’m not willing to pay for potential.
Can you give me some feedback on your mistakes in the early years?
Re: Do I pull the trigger on this park - Posted by Sailor
Posted by Sailor on December 20, 2005 at 20:40:16:
I’m still making mistakes after 25 years of investing. Some I’d like to have avoided in the recent purchase of my MHP include (1) paying too much; (2) accepting seller’s books; (3) not realizing the reason the exact same Rental Agreement was used for all tenants is because they were all signed just prior to COE; (5) not getting on a ladder to view the roofs; allowing one tenant to talk me into signing a 12 mo. agreement; (6) trying to avoid instituting changes right away, when the tenants expected them; (7) not requiring estoppels; etc. ad infinitum. However, in addition to “Eat dessert 1st,” my motto is “No Regrets.” I’ve met some interesting folks (& pit bulls), learned how to buy good paint cheap, gotten to know the entire sheriff’s dept by 1st name, been regaled with very tall tales by tenants, read a book on septic tanks @ the lunch table, grabbed a plane just ahead of a hurricane, & enjoyed the satisfaction of being willing & able to put my money where my mouth is on affordable housing. Who could ask for anything more?