Lot Rent fee too High? - Posted by Paul Carlin

Real Estate Investing Real Estate Financing
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Posted by Kristine on May 26, 2000 at 02:45:39:

Lot rents here (central coast CA) are $300-350. I have the same concerns as you do–see my post below “Buyer eligibility and income.” However, I placed a test ad in the local paper with the heading “Will finance.” I included the length of term, interest and monthly payment: $300.00. I’ve had several calls in the last two days and no one seems phased by the lot rent in addition to the mh term payment. For the $650, a family can get an apartment in this area, but not a nice one. And a low downpayment and terms seem to make all the difference. I now have two potential buyers who are aware that I am marking up the homes 100% (from $9K to 18K) and they don’t seem to mind. They don’t have cash, I do, and they will pay what the home costs and will be happy to have someone give them a chance to own. This has been very educational for me. I suggest that you run a test ad and check out the responses.

Keep us posted. I think others will be interested as so many of us don’t live in places where the streets are paved with cheapo Lonnie deals. The formula, however, I hope, works anywhere.

Looking forward to hearing about your progress–Kristine

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Lot Rent fee too High? - Posted by Paul Carlin

Posted by Paul Carlin on May 25, 2000 at 16:57:38:

I live in Provo Utah. I live down the street from a mobile home park. The managers are good friends of mine and he told me that there are over 30 units for sale in a park of over 100 lots. They said that most people cannot sell their properties. The managers told me the reason they believe that they cannot sell is because the lot rent fee is $250 a month. If it?s a lot for your areas? I?m feeling it is way too high. My problem is this I could buy a lot of homes very cheaply but after the rent of the lot people will be paying more than they can for regular condo. How do I make this work. I know that the people who buy condos are not the same people looking to buy a mobile home. Credit in job situations are different but still paying 600 a month is very hot for mobile home. What would you suggest shed not even try to try to make some deals work.

Paul Carlin
badoy@yahoo.com

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Re: Try $495/month on for size - Posted by Sheik

Posted by Sheik on May 30, 2000 at 07:50:26:

That’s Long Island for you!

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Re: Lot Rent fee too High? - Posted by Travis Capps

Posted by Travis Capps on May 27, 2000 at 09:04:12:

I’d LOVE to get lot rent that cheap! The park I’m working in goes for $445.00/ month. It took two months to rehab and sell my first MH, adding $890.00 to my costs.

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All Markets vary…however - Posted by Dirk Roach

Posted by Dirk Roach on May 26, 2000 at 12:47:22:

Hi Paul,
What kind of a discount could you get by buying ALL 30 units at one time??? Or at least why not tie them all up with an option etc.

Anyhow as far as space rent, ALL MARKETS VARY! Meaning what the average in my market (S CA) will vary greatly from say Tulsa OK ect.

Anyhow that is irrelevant, what you have to do is figure out what your target buying group is currently paying for housing costs. Most likely your going to sell this home to a young couple, moving up and out of a rental situation and perhaps have a blemish or two on credit.
Okay they’ll most likely be moving out of an apartment setting (2 bedroom max) so what cost do they have a consistent track record of paying?

Once you have that number you will know what type of note payment to work, and what level of space rent you are willing to play in.

For Example, Lets say that the average 2 bedroom apartment goes for $500.00/month. Okay your buyers have been paying that for five years and have never missed a payment. This is something that they can handle. Okay, so you space rent of a particular park that has a 2 bedroom mobile home in it that you think you can pick up for a deal, is $250.00. Now what that means is your potential buyers can not only pay the space rent but also a $250.00/month note payment. Sounds workable.

Also you can continue this and figure out a few other things.

For example, this is what you know so far
a.) Monthly Note Payment $250.00
b.) Interest 12.75% (Lonnie Standard)

Now you need to figure out how long you want to carry a note for… Let’s pick a number out of our hat…say 38 months. Okay now we know:
c.) Term 38 months

So now we plunk those three numbers into our Financial Calc, to solve for the unknown, PV (the amount of the note) And the number $7782.71 pops out,
d.) PV $7782.71

But that is not our selling price remember we like to make sure that buyers are serious when they step up to the plate, so we charge 10% as a down payment. So what is 10% of $7782.71? $778.3, so we add that (as a minimum, remember we can take a bigger downski if they have one) to $7782.71 which gives us $8,561.00 That is what at a min. we are selling for!

So now that we know this we know that we want to be in this deal at a max for around $3k or so.

Anyhow hope this helps,
Dirk

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$250 isn’t bad at all - Posted by Blane (MI)

Posted by Blane (MI) on May 26, 2000 at 07:30:43:

Paul,

I’d love to have $250 lot rent in a decent park around here (Detroit). The parks I’m running around in go from around $300-$375. To get to $250 here means a run-down park, or you have to get out into rural areas.

You should easily be able to combine that lot rent with a MH payment that’s equal to or less than renting. Run your test ad and see what happens. It sounds like you have an inside track with your friends. If you could help the sellers by buying their home, and help your manager friends with getting decent people in their park, you could end up with your own little monopoly here. Go for it and let us know how it goes.

Hope this helps,

Blane

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Re: Lot Rent fee too High? - Posted by Lonnie

Posted by Lonnie on May 26, 2000 at 07:23:32:

Hi Paul,

Check and see if the lot rent compares to other parks. If so, then the problem isn’t rent. Average rent in my area is $275-$285.

You need to talk with some of the sellers and see why they can’t sell. If it’s mostly older homes, it’s probably because a buyer can’t get financing. If that’s the case, you have a good opportunity to create a lot of notes.

Try running a test ad “14 x 70, 3/2 Will Finance-No Banks etc”, and see what you get. If you keep the payment and lot rent affordable, I’m betting you can generate sales. Learn what’s for sale (negotiate with the sellers), build up a list of potential buyers, then match the two together, and make a deal. This way, you can have it sold before you buy. (Review chapter 8 in DOW, “Finding A Buyer”.

Good luck,

Lonnie

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Re: Lot Rent fee too High? - Posted by ChrisAZ

Posted by ChrisAZ on May 26, 2000 at 01:08:39:

In my area (Phoenix) lot rents range from 200-275 and there are plenty of people willing to pay this price. A good rule of thumb to go by is if the lot rent and house payment are similar to apartment rent you should be able to find plenty of buyers. As far as condos go you may be able to get a similar monthly payment to MH+lot rent but to purchase a condo or any real estate you will need a bigger down payment and better credit, there are alot more people with 1000 to put down on a MH than there are with 5000 to put down on a condo. Keep checking it out.

Good luck

Chris

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Re: Try $495/month on for size - Posted by mattmann

Posted by mattmann on May 30, 2000 at 10:13:19:

Hi Paul,

I live in the Columbus, ohio area and the parks i’ve looked into in Cleveland and Columbus, run from $195 for a slot in a park in an urban area near the westside of Cleveland, to $225 in the suburbs. In Columbus, it’s not that different. $190 for a rural area 45-60 min from downtown Columbus to $275 inside Franklin County 20-30 minutes from downtown Columbus. The high water mark was $295 for a lot in a park with wide paved roads, individual driveways, porchside garbage pickup, a fitness center and daycare… (SHOWPLACE OF A PARK!)

good luck and go for it!

Mattmann