Posted by George_AZ on December 15, 2000 at 18:01:20:
Teddy;
We did not replace any of the older mobiles after we purchased the park. The existing service is 100 amp which is adequate because we don’t have any ac units and heat ,water, stove are all gas. Due to the dry climate we cool with evaporative coolers which have a 1/3 to 1/2 hp motor.
When I installed new units on the 2 vacant spaces 14x56 and 28x42, no service upgrade was required. 100amp was ok with the city.
I don’t like to have any more contact with the city then necessary, and many things they could choose to make issues out of don’t come up if you don’t put them in the position of taking an official stand. ie if things are safe for your tenants don’t throw sticks at the hornet’s nest.
Posted by TeddyB_SC on December 06, 2000 at 23:29:23:
When purchasing a MHP would you consider only the income from the value of the lot rent or would you take into consideration the rent from the mobile home.
For instance, 10 space park with approval for two additional spaces. One space rented for $150, the other nine have 2/1’s and 3/1’s averaging $340 a month. The homes date from 1962 to 1968, one water meter, seperate electric. I am concerned about the age of the mobile homes (i.e. aluminum wiring, general maintenance).
Any help you could give me would be appreciated.
Re: Mobile Home Park Purchase - Posted by SteveC_GA
Posted by SteveC_GA on December 12, 2000 at 22:31:59:
I purchased an older MH park a few months ago and faced the same questions you are asking. I put a separate value on the lots and did not consider the 8 MH’s that came with the purchase. This park had several rentals in it, including the 8 that came with the purchase.
I viewed this park as two possible sources of income. The first came from the lot rents. The park has 37 lots with owner occupied MH’s and the rest (32) were rentals or vacant lots. Everytime I rent a lot out, an extra $125 per month will be added to the bottom line and almost 8K to the value of the park, depending on what cap. rate you use.
The second source of income is from the sale of MH’s with owner financing. This park is no longer a “rental” park. This forced the landlord’s renting units in the park to remove them or sell them to me. My lot rental income decreased in the short term, but it was a sacrifice that will bloom in the long term. I ended up buying an additional 6 MH’s along with the 8 that came with the park.
Think about it, now I have my own playground of “Lonnie deals” to prosper with. I Don’t have to worry about PM’s anymore.
All of the MH’s I got with the park where early to late 70’s models. All were in bad shape, but definitely repairable. I am systematically rehabbing the MH’s and selling them on notes. I’ve averaged about 3K in fixups and selling them for 10K each, with 1K down.
One last thing about value on the lots. In my area it costs about 10-12K per lot to build a new MH park. Older MH parks have been selling for 6-8K per lot. I ended up purchasing this park for just under 4K per lot. The reason I bring this up is that you must be educated about your local market. Otherwise, you have no basis to judge whether the price on a MH park is justified.
I apoligize for the lengthy response, but hopefully it will help you as you look at this investment.
Re: Mobile Home Park Purchase - Posted by Jeffrey,IL;MI
Posted by Jeffrey,IL;MI on December 08, 2000 at 19:46:01:
Teddy,
If you are serious about this MHP, you would benefit greatly by purchasing Ray’s book "the DealMakers Guide to Mobile Home Parks. He covers your questions, and has much more information that you probably don’t even know you need to know!
Basically, he discourages “horizontal apartment buildings.” In valuing such a park he recommends valuing the “pads” and homes separately. I think he’d recommend getting out of the rental business as soon as possible, but doesn’t cover this process in much detail. Some of the homes are liabilities as you may have to pay to get rid of them. Ray addressed the aluminum wiring issue and I believe he considers it no big negative.
As you know, Lonnie discourages dealing in these old homes if you can avoid them. I’m not a “Lonnie dealer” (yet) but from what I’ve learned in Lonnie’s books and Ray’s, the key to the marketability of these older trailers is to know your market. They might give you an opportunity to upgrade the park over time.
Re: Mobile Home Park Purchase - Posted by TeddyB_SC
Posted by TeddyB_SC on December 09, 2000 at 01:07:52:
Jerrery, thanks for your response. You raised an interesting point. The homes are really “to old” to do Lonnie’s, and moving/disposing of them in the future may present a problem.
Lot rents in this area are $200-$250 and go like hot cakes. This park has only one lot space with a private MH and that is rented at $150. I think the best thing to do is to research this using only the pads with a minor consideration for the MH’s.
Re: Mobile Home Park Purchase - Posted by George Arizona
Posted by George Arizona on December 11, 2000 at 23:20:22:
I definitly would not consider the income attributable to the mobiles when determining a value for the park. That would give you a falsely high value. When I purchased my 11 space park which came complete with 1960’s and early 1970’s era wobblies, I figured $15000 per lot based on potential income just for lot rent and about $4000 a piece for the mobiles considering that they were already there and set up and grandfathered in. Income attributable to the mobiles roughly equaled income attributable to lot rent even tho the lot values were over 3 times the value and/or cost of the wobblies. This is, I think, because renting older mobiles is more of a job than an investment. Of course the cash flow is great for minimal capital. Another thing to consider regarding older mobiles that may be grandfathered in is that what may be a worthless junker anywhere else will have value only to you as an income generator due to its “grandfathered” status. Good luck; George AZ