High/low lot rent vs Location - Posted by Ray(Ga)

Posted by ScottS(NC) on April 11, 2002 at 20:35:24:

Ray,

Thanks for the kind words, And Mrs.ScottS is much less of a “dummy” than I am! She keeps me focused LOL Take Care ScottS(NC)

High/low lot rent vs Location - Posted by Ray(Ga)

Posted by Ray(Ga) on April 11, 2002 at 10:20:22:

I have what appears to be a Lonnie Deal, but the lot rent is $375 per month. Since the present owners have paid off the MH, their only monthly expense is the $375, but a new owner would be paying that plus the monthly payment for a 1987 MH. The park is not great but the location is very good. Is this high lot rent enough to kill the deal? I would really appreciate some of your thoughts on this. Incidently, the seller is at $4000 and I feel I can buy close to $3000. The MH is an 87 Fleetwood 14x70 2BR 2BA, central H&A, fireplace, shingle roof,but does need some repair on the exterior wood siding. I would definitely do it if the lot rent were more reasonable,but would like to see what some of you experts think. Thanks very much for your time…Ray

Park owners can steal your equity … - Posted by Dr. Craig Whisler CA

Posted by Dr. Craig Whisler CA on April 16, 2002 at 19:29:26:

…with excessively high lot rents. I believe the lot rent rent can affect the appraisal value of mobile homes, sometimes dramatically. When asking the value of a mobile home this point never seems to come up. I think it should.

Lets take an extreme hypothetical situation for example to clafify how this could work. A mobile worth $15k is in a park with space rent of $200/mo. Lets say this is about market rent for the area. Now what happens to the mobiles value if the next day the park raises the rent to $600/mo? Well you would practically have to give the mobile away free to get rid of it. In fact noone would be likely to even accept, it even as a freeby, if it had to remain in the same park. It would even lose value as a pull out because of the cost of moving and setting it up elsewhere. So you see in parks with abnormally high rents your mobile is really worth less and vice versa.

Now Ray, lets apply this to your situation. If you feel the rents are definately on the high side you need to reduce the value and purchase price by some corresponding amount because the mobile would simply be worth less than if it were in a park with cheaper rent. You need to explain this to the seller and try to buy more cheaply because you will need to sell more cheaply. This high space rent is currently the sellers problem. If you choose to make it your problem by buying the mobile you will need to get it at a lower price than if the park rent were normal. This may be a little hard to explain to the seller but try.

Always ask how long the mobile has been for sale. The longer it has been for sale the more likely the seller will be to reduce the price. If you feel that you can buy it for close to 3k, start lower. Offer 2k and let the owner sit on it for a while. Put a 2 week time limit on your offer to try to reduce the possibliity that the seller will use your offer to shop for better offers. Make you offer orally, not in writing so the seller can not show it to other prospective buyers and use it as a lever to jack up their offers above yours. Always remember that the asking price is what the seller hopes to get for it, not necessarily the lowest amount he will accept. The seller will never reveal to you what his bottom line is. You have to probe for it with ‘straight faced’ lower offers and then wait.

The bottom line is, I think you should make an oral offer of 2k with a 2 week time limit on it. You can always make a 3k offer later if this doesn’t work.

Ray, why not invest $30 to cover your bets and run a test ad to see if you can get bites for reselling this mobile for $6k-$8K or more with $500-$1,000 down, at that park rent. If you get a strong response of reasonably well qualified buyers or someone who is willing to put, say 1/2 down then let that influence your decision to buy it or not, and at what price.

Good Luck, doc

Re: High/low lot rent vs Location - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on April 11, 2002 at 22:08:10:

Ray–(GA)---------------

I like some of the suggestions you have already gotten. Here is what I might do were I in your situation.

I’d go and talk to some of the occupants in the mobile home park. You might even run into somebody else who wants to sell.

Good InvestingRon Starr***

Re: High/low lot rent vs Location - Posted by ScottS(NC)

Posted by ScottS(NC) on April 11, 2002 at 13:04:53:

Ray,

The high lot rent sounds like a disadvantage but not a show stopper. In my neck of the woods Asheville NC lot rents are similar to you in hotlanta. What I do when a good deal comes around in a high rent park is lower the payments to the house and lengthen the loan time. I personally like Longer loan time than the typical lonnie deal anyway. Why do I want to hurry up and get the note paid off when it is earning me 12% and the longer the note the better the chance they will GIVE me the home back. Most people shudder at the thought of getting the home back through repossesion or just handed back to you. I smile at the chance to cash in on the same investment twice. Sorry I digress, keep the payments around rental prices stretch out you loan and make a killin on it once or if your lucky twice ect… HTH Take Care ScottS(NC)

Re: High/low lot rent vs Location - Posted by GerryH VA

Posted by GerryH VA on April 11, 2002 at 11:19:04:

Lot rent depends on your market. In the wonderful? state of CA this is normal. In my area, $375 would be ridiculous. What are other mobile home lots in your area going for. Is this an abnormality or is this status quo? Just like in real estate, location does make a difference. You may want to test the market by putting an ad in the paper with the lot rent plus a reasonable payment for the home and see what happens. What is the vacancy rate in the park. The park owner/manager should be able to shed some light on whether this is a high demand park or not. Just some thoughts.

Good Luck

GerryH VA

Re: Park owners can steal your equity … - Posted by Ray(Ga)

Posted by Ray(Ga) on April 17, 2002 at 20:09:15:

Thanks Doc,makes a lot of sense…Ray(NT)

Re: High/low lot rent vs Location - Posted by Ray(Ga)

Posted by Ray(Ga) on April 13, 2002 at 09:23:27:

Thanks Ron…Good suggestion!..Ray

Re: High/low lot rent vs Location - Posted by Ray(Ga)

Posted by Ray(Ga) on April 11, 2002 at 16:34:53:

Hey Scott, thanks for taking the time to give me your opinion. I’ve read a lot of your posts and respect your knowledge of the business. Thanks again…Ray… Oh, by the way, I have noticed that Mrs. ScottS is no “dummy” either. Later…

Re: High/low lot rent vs Location - Posted by Ray(Ga)

Posted by Ray(Ga) on April 11, 2002 at 11:47:05:

Thanks for your reply, Gerry. This is the Atlanta,Ga. area and lot rents can range from $140 for a park off the beaten path to $450 or so for manicured parks with all the amenities. I guess my question is,given this range,does the downside of high park rent override the upside of an older MH that seems to fit a Lonnie Deal?

You take the dollars and I’ll take the sense. - Posted by Dr. Craig Whisler CA

Posted by Dr. Craig Whisler CA on April 17, 2002 at 20:43:09:

You’re welcome :~)