Posted by Sid on October 30, 2003 at 21:04:17:
Hi Tim, i also live in your area and would like to talk with you about investing in the area. i sent you an e-mail with my name and e-mail address if you would contact me i would like to talk to you. thx
MHP… is it worth it? - Posted by Doug (Alabama)
Posted by Doug (Alabama) on October 28, 2003 at 21:19:31:
Hi all,
Ran across this MHP in a local paper last week and got some email info today. Don’t have everything yet but just wanted to confirm my opinion on this deal.
92 spaces sitting on 17 acres
City water, sewer and billed to tenants.
Management in place
It now gets confusing!
89 MH rented
5 vacant.
This doesn’t add up but that is what they emailed me.
Rent roll shows $13,060 per month or $156,730 per year.
Books show $172,510 gross for 2001.
No details on expenses, debt service or management compensation.
They are asking $1.1 mil.
I plan on touring the park later this week and asking more questions and eye balling the trailers for age and condition.
The numbers almost makes it look like they are at 50% occupancy or something!!
Any comments or pointers would be appreciated.
Thanks again for all the help.
Doug.
Re: MHP… is it worth it? - Posted by ScottS(NC)
Posted by ScottS(NC) on October 29, 2003 at 07:46:28:
Doug,
Just a quick snapshot I use is to look at the gross income $13,000 and lets say you borrowed the 1.1 million whats the debt service. At 10% interest amortizied for 20 yrs I get $10,615.24 as a monthly payment leaving you with $2,384.76 left for all other expenses VERY slim. Now there is ALOT more factors that could change this analysis for better or worse like current vacancy fix up requirements ect. But from a quick snapshot based on monthly income this deal looks to skinny. Do your Due Diligence! Take Care ScottS(NC)
Re: MHP… is it worth it? - Posted by Howard
Posted by Howard on October 29, 2003 at 07:14:33:
This sounds like it is worth looking into. I approach it this way. Is the location of the park good enough to fill up if the park was empty? Poor location knocks it out of the box. City water & sewer is almost a must for me. Others can deal with waste treatment plants, wells, etc. For me, there is enough to do without dealing with state environmental agencies, Are the spaces big enough for the newer units that you will want to attract or buy? 5.5 spaces per acre is very good and would be as spacious as most top quality parks. How are the roads? You might have to re-do them. Not a deal breaker, but keep in mind the costs.
Now for the income. Lot rent (not mobile home rent) is the key. The mobiles may be old and not worth keeping, even costing you to move them off. It is hard to attract nice mobiles if you have junky rentals, so you might have to move them all out over a short time. If they are old but well kept, you can sell them against notes (Lonnie deals) and have lot renters who would be more likely to keep the units in good shape. Mobile home renters and mobile home owners do not mix. Some investors don’t mind a rental park, but I don’t want the hassle.
Now expenses. With water and sewer billed to the residents, and the park reasonably full to cover general costs such as management,and no high cost maintenance items such as swimming pool, 30-40% of gross rental should cover costs. Our gold standard is to try to get costs down to 25%.
If you know the market rates for lot rents, you could calculate what the net “could” be and can do some calculations about what rate of return is acceptable, taking into account financing debt service (new mortgage, assumable loan, seller financing).
This is the easy part. You need to envision a way to get from the “here and now” to where you want to be in terms of time, money, effort.
I hope this is a start. Good luck.
Howard
Re: MHP… is it worth it? - Posted by Tim
Posted by Tim on October 29, 2003 at 06:57:55:
I think this may be the same park that is listed at themobilehomeparkstore.com, but it shows the sale as pending there. The ad says that 19 of the homes are park owned. If it’s the same park I would want to find out either why the deal fell through or why it’s back up for sale. Based on what I have heard about parks here(Opelika/Auburn) the price seems high.
good advise Scott/ NT - Posted by Greg Meade
Posted by Greg Meade on October 29, 2003 at 10:08:06:
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Re: MHP… is it worth it? - Posted by Jerry
Posted by Jerry on October 29, 2003 at 07:57:48:
Tim,
I am curious about the problems you are encountering in Opelika/Auburn area. Isn’t thatt a college area and a good rental area??? Just curios. I live in Fl. and trying t get t feel of Ga., Al, S.C., ect
Thanks for any input
Re: MHP… is it worth it? - Posted by Tim
Posted by Tim on October 29, 2003 at 09:37:35:
I have been in real estate investing here for about 13 years, & am just now looking into mobile homes & parks. The parks I know about that are for sale here have ASKING prices of $10-12,000 per lot, I haven’t seen any sell recently. Lot rents run in the $125-150 range, & include water/sewer. It is possible to do “Lonnie” deals here, but I don’t like the idea of being at the mercy of the park owner. I am looking at parks & land/home packages, & will close on my first lot next week. It’s in a rural area, has a power pole & water meter, needs a new septic($2500); I’m paying $900 for the lot. I’ll put a newer model repo on it, & should have about $11,000 in the whole package. I haven’t decided if I’ll sell the package or just the home, but should come out OK either way. I was supposed to close on this lot about a month ago, but there was a judgement against the seller & we had to negotiate with the judgement holder to get them to accept what I am paying for the lot.
Yes, this is a college area, & should be a good rental area. However, in the last 10 years there has been a lot of new construction, this school year there are a lot of rentals sitting vacant. I think that the next 3-5 years will be tough on landlords, which should make for some good prices down the road. The problem is, there are a lot of high income people here who are willing to buy properties that have a 20 year payoff with 20% down that have little or no cash flow. Most of my real estate is in a small blue collar town about 20 miles from here. Almost no appreciation, but you can get a decent cash flow with no down & a 10 year payoff.