Bought my first park but I need help

I NEVER thought I would ever want to own or be excited about buying a mobile home park, but my first one just kind of “fell in my lap” last year. I was offered a park with no money down and the owner was to hold the financing. It was in trouble and was only bringing in anywhere between 800-1200 a month for the owner, when I bought my first trailer in the park. Long story short, he couldn’t oversee it and it wasn’t being managed correctly. I was a licensed Realtor at the time (l went inactive and have since removed my license), so I knew I had enough experience and investors that I had sold to that I could ask questions. Long story short, I started by evicting, but learned that it was easier to buy the people out. I got their homes and they moved. I rehabbed them and put renters in. Since November, I spent $15,000 in borrowed money (very high interest) but have reaped the benefits so I think it’s worth it. Last month we brought in 7200 and July should be around 8000. We are just finishing 2 last mobile homes this week. The thing is, I’m addicted. I now have a chance to buy another one the same way. However, the price on this 2nd one is the same I paid for the first and it’s not as big. It will be immediate cash flow but still? I will pay nothing down and no payments for 5 months, except for the wrap around mortgage payment. Nothing to the owner. My dad use to tell me that it’s not what you pay for something but HOW you pay for it. Is it ok to pay more than market if you are not using your own money and there is potential? I would love to have some of your seasoned advice. Failing is not an option for me. I will learn how to succeed at this, but I need help. Thank you all in advance for even reading this long post.

Well New, I realize that you are excited but you have not given nearly enough information for me or anyone else to work with.

Ray Alcorn has Dealmaker Guide to Mobile home parks available on this site. It is a comprehensive guide to evaluating MHPs and would be a very wise use of your time, before you go any further…you will need to block off 2-3 days to study and digest.

Of course Lonnies books are a must read.

You may have the best deal in the world or you may have bought a time bomb with a short fuse, Due dilligence before the sale is best, but even after the fact, you would be well served to have the infrastructure of your park evaluated so that you can determine if a large cash call is near at hand.

Great terms can really improve a good deal on a solid MHP. But some have so much needed in the way of crumbling roads, water lines, sewer lines, and waste water treatment, that they are no longer viable.

Thank you

Thank you for responding. I will look into the resources mentioned. I am just learning this and am doing on the job, so to speak. My first park was in bad condition because of the condition of the homes and roads. I invested about 18000 in borrowed money getting everything up to par and now have 16 park owned homes, that are in great shape, renting between 400-650 per month and 4 homes that pay 200 in lot rent. Around 8000 per month but the water bill is around 600-700 and the garbage is 200. The bank mortgage is 1000 (which the seller is still the gaurentor on) and I pay the seller 500 per month for his equity. We did a 15 year note. I paid nothing down and no payments for 6 months so I could improve things. Selling price was 175,000 for 21 spots and I have 2 vacant still. All septic tanks are good and no other problems that I am aware of.
2nd deal (the one I am asking about) Nothing down, no payments for 5 months and selling price is 175,000 for 16 spots, 15 have septic, water and electric. It is all sub metered and everyone pays their own water and garbage. There are 5 park owned homes and 3 homes that are lot rent. They are underpriced. Lot rent is only 100 and should be raised and the rent for the homes are 400,450,450,575,550 There are 7 empty spots which are ready. Park only appraised for only 110,000 5 years ago. However, on a 15 yr note that is all owner financed I would pay 1500 per month for 8 yrs., and 800 per month for the last 7 yrs, If all spots are filled there is a wonderful cash flow but even the way it is, it pays the bills and still has cash flow. It is just overpriced, but does that really matter if you can make money? That is the real question? How do you experienced ones make the call to proceed? Also, this 2nd park has 2 homes on it that the seller gave 30,000 for! Of course, I only have 3500 each or less in all of mine but they still bring in the rent.

I am not sure how you are determining the park is over priced. That said, it is not as critical to the core question.

What you pay is not just the headline price. It can very much be driven by the terms. Terry Vaughan explained once how he agreed to buy a property for 2x its value. It was a lease option deal and he had 40 years before the option ran out. The price was fixed for 40 years. Did he agree to over pay?

The problem with overpaying now is you are significantly limiting your exit if you find that you need to sell. A change in your ability to be a hands on manager might create pressure to sell. If you have agreed to buy for a price that you could not receive, what will you do?

This is more or less the same problem when the price is right and there are still no buyers.

Work the numbers and see what makes sense.

BTW - If you agree to pay someone over time, remember you can approach them in a few years and offer to pay them off early if they discount what you owe them. I am not saying you should agree too much now just to get the chance to discount it later. Just something to remember later when the note holder gets a bit tired of receiving payments.

Hi New,
Congrats on a successful turnaround of the first park. Don’t forget to set aside some $$ for buying newer homes in the future to upgrade the park.

Also congrats on considering the second park. Although you are overpaying for this park, based on your experience in the first park, can you significantly improve the 2nd park’s value as relatively cheaply and quickly as you did the first? If so, then it sounds worthwhile.

It is hard to tell from your posts how many homes you brought in to park 1 vs. the 7 you will need for park 2. Thus there may be a significant difference in initial $$ outlay and work. Plus you have the total development of the 16th lot.