Posted by Todd(AZ) on December 09, 2008 at 13:30:34:
I’ve had no problems selling 12’ wide, older, 1970’s, 2 bedroom homes. It’s my bread and butter and virtually all I have to chose from in my market so I’ve made it work. I think its dependent on geographical location, availability, etc. I’m mostly just throwing this out there for potential lonnie dealers in similar markets to mine who don’t have an abundance of 1990+ 3bedroom mobile homes for sale under $5,000. Todd(AZ)
Do we have a deal? Pick this park apart! - Posted by Penny
Posted by Penny on December 08, 2008 at 05:59:52:
Weâ??re veteran house flippers looking to buy our first park. Weâ??re pretty interested in this deal - but is it really a deal? Hereâ??s the details.
I did a direct mail letter to about 200 park owners. Phone rang off the hook! Got 25 responses in ten days. My first thoughtâ?¦why do so many want to sell??? In any case, so far weâ??ve narrowed down the leads to this oneâ?¦
Seller asking $140K
3.4 acres located in a military town. Every park owner Iâ??ve talked to says vacancies are not an issue but turnover can be.
10 units - all separately metered for water/electric. All have individual septics. One of the units is not in the park, but on a rented lot across the street. Main road is not paved but in good condition. No pads or driveways at units. Typical to this area, people drive in the yard to park, so they all have dirt/worn grass parking areas. Despite this, the yards/grass are very nice and we did not see any standing water issues.
There is a additional unit not hooked up that is used for storage. Looks terrible but does serve itâ??s purpose well.
The current owner has treated the park like a personal housing area for friends and family, so the current numbers arenâ??t great. Owner lives in one unit, daughter lives in one rent free and several others are vacant for one reason or another. Rents have not been raised in years. Owner seems to rent low to rent quick and to keep the long termers.
Hereâ??s the breakdownâ?¦ (the /$ under rents indicates what the unit SHOULD be getting if rented)
Lot# Rents Year Size Bed/Ba Condition/Notes
1 vacant/$475 1984 14X70 2/2 uninhabitable. Needs removed.
2 owner/$475 1974 14X70 2/2 good interior/exterior needs work
3 $400 1973 12X60 2/1 fairly new tenants
4 $350 1970 12X60 3/1 Decent exterior. Long term tenant with spotty payment history.
5 $450 1997 14X70 3/2 Best unit in Park. Long term tenant who does work in park.
6 $375 1983 14X60 2/1.5 tenant moving soon. New baby on the way. Spotty payments. Will need work.
7 family/$395 1971 12X70 2/1 decent
8 $450 1983 14X70 3/2 Ugly exterior!
9 vacant/$350 1972 12X50 2/1 needs repairs - s/b less than $350 to fix.
10 vacant/$475 1990 14X70 2/2 Good condition. On rented lot @ $90 month.
In a nutshell, only 5 units are now collecting rents (#3,4, 5, 6, 8), #1 unit needs pulled off and replaced, #9 needs repairs before renting and #10 just needs to be rented. If we purchase, owner wants to stay in #2 for some time and daughter will vacate #7.
If full, at current rental rates, the park should be grossing about $4195 per month ($50340/yr)
The total monthly expenses are $1787 as Iâ??ve attempted to budget them
40 Security Lights
80 Trash
150 Insurance
39 Taxes (Land - $460/yr)
23 Taxes (Units - $268/yr)
400 Lawn Maintenance (this is a WAG. Right now tenants are “supposed” to maintain their own lawns)
125 Legal (.0025 of gross rents/12)
420 Repairs (10% of gross rents/12)
420 Vacancy (10% of gross rents)
90 Lot Rent (#10)
$1787 TOTAL Expenses ($21444/yr)
So hereâ??s what we need help withâ?¦
What should we offer for the park?
If I use one guy’s QAD formula before even looking at the park (units-vacancy X lot rent X 70), it looks like this: 9 X $175 X 70 = $110250
Using Chrissy Jacksonâ??s Value formula (I/R=V), I come up with $115584
Put into words, the Value of the community (V) equals the Income (I) divided by the Rate of return (R).
28896/25%= $115584 (thot Iâ??d share those formulas for other newbies like me - though rate of return is another WAG).
Iâ??ve seen other ways to structure an offer but Iâ??m sure I need a better grasp of the value of the units themselves.
But, being the house flipping type, it seems like weâ??re leaving out a huge expense - removing and replacing one unit.
What would you offer for this park?
What questions do we need to ask about the infrastructure?
What contract contingencies should we include?
What other questions do we need to ask???
This “seems like” a good deal but I donâ??t bank on “seems like”. I want the numbers and the facts to talk to me. Iâ??m just not sure of all the questions to ask. Given the facts, I can run the numbers on flip house in minutesâ?¦I want to be able to do that with parks, too. Thanks for any and all feedback.
Re: Do we have a deal? Pick this park apart! - Posted by Don-NY
Posted by Don-NY on December 08, 2008 at 18:07:26:
To come up with a value without knowing the following facts is almost impossible.
What are your plans for the park?
Is there any owner financing?
What kind of down payment?
How is your state on evictions?
How many of the current tenants (both paying and non) are LIKELY to stay after you “start being a jerk” and making them tow the line?
Have you actually been in all the units?
municipal water?
If well is it health dept monitored?
How old is the park?
I would look at this park as horizontal apartments and go with Tony’s checkbook value method.
That being said I think it has potential not at 140 but maybe at 100 especially if owner financed.
I have never heard of a home that is not being relocated having to be brought up to hud code (but then again I am in NY)
Whatever you are figuring for rehab double it…and then add 50%
If you are not or have not been a landlord you are in for an adventure to say the least.
No deal - Posted by Anne_ND
Posted by Anne_ND on December 08, 2008 at 16:47:26:
Half of these homes are pre-1976, and therefore likely need significant work to bring them up to HUD standards. They have values of less than zero.
If you do want to pursue this, go to the local zoning board and find out if the park is in compliance for local regulations, and if it’s not, then is it grandfathered in. Could be that the sale itself could trigger the whole thing being declared illegal, I’ve seen that situation.
Finally, there are so many components of buying a mobile home park. I strongly suggest you buy Ray Alcorn’s book on the subject, or some other materials. It’s not possible to even begin to approach what else you need to look for in one post.
good luck,
Anne
Re: Do we have a deal? Pick this park apart! - Posted by mike Barlow
Posted by mike Barlow on December 08, 2008 at 15:20:09:
“If I use one guy’s QAD formula before even looking at the park (units-
vacancy X lot rent X 70), it looks like this: 9 X $175 X 70 = $110250”
I’m being told on this board to separate the space income into one
value and then add the value of the homes or the home income into
another value. Using the 60/30 RULE the value of the space income
comes to $40,500. (90X60X5 (occupied)=$27,000 and
90X30X5(vacant) =$13,500). In my area the homes would not get
much each wholesale, say maybe $5000 for all of them. Total value:
$45,500.
I don’t like military towns as a big deployment can send the town into
a recession.
Re: Do we have a deal? Pick this park apart! - Posted by Shawn Sisco
Posted by Shawn Sisco on December 08, 2008 at 13:31:17:
Penney, My mental image of this MHP ain’t pretty. It seems to me that you are buying yourself some tools to work with(not good tools) - not an investment. Tony Collela’a checkbook approach to valuation would seem to be the most applicable method to use (an archieve search will provide explaination)But I would suspect that there is actually $0 income given the current owners penchant for housing friends and relatives. If I wanted this property, my offer wouldn’t exceed whatever 3.4 acres similarly located would sell for.
Re: Do we have a deal? Pick this park apart! - Posted by Anne_ND
Posted by Anne_ND on December 09, 2008 at 06:37:48:
Don,
My concern about the age of the homes relates to the value when sold as a Lonnie deal, or the liability when rented out. Units this age are hard to rent or sell, and should something happen with the wiring, etc., the park owner, should they also be the seller will definitely have liability.
I’ve had a few homes this old and they were usually not successful, although my highest yield on a Lonnie deal (990%) was on a 1973 home that had been slightly remodeled. I think I had $50 in the deal personally, and sold it for $2500 on terms.
I lost money on a few other older homes- one was a beautiful little trailer that had been completely restored by a couple of college students. But even though it had laminate floors, new windows, very cute bathroom and new appliances I just could not keep people in that home. I think I had 4 different buyers in there. I’ve had plenty of homes with 4 buyers, but for this one, each time it went empty I paid lot rent for at least 3-4 months. I finally sold it for $1000 cash to someone who hauled it away.
Anne
Re: Do we have a deal? Pick this park apart! - Posted by Don-NY
Posted by Don-NY on December 09, 2008 at 08:07:03:
Anne,
You are correct in older 10/12 wides being hard to sell (and get paid off on). We have had the same problem.
But reading the post Penny is indicating they will rent the units. This changes everything. We have good luck RENTING older 10/12 wides. And the tenants expectations are very modest.
This park would fit our investment strategy pretty nicely.