Mobile Home Park question - Posted by Mark (SDCA)

Posted by Ray on January 16, 2000 at 21:17:37:

While I don’t have first hand experience in #1, a big-time investor in my area did the following on a large real estate deal.

He purchased a large, very old hotel, in need of a lot of work. His intention was to rehab and sell off the units as condos. My understanding is that he purchased the entire project and had an agreement with the bank (who was aware of his plans) that the first few he sold, 100% of the price went towards principal, then a sliding scale with a lower and lower percentage going towards principal for each sale. The bank simply released the leins on units as they were “condo’ed”. Of course, this is a little different, as he was not holdign financing on the units, but I suspect the bank would be even happier if he did. Theoretically, if he was selling for $100k, getting 10% down and holding 90% (or whatever the deal), the bank could extend his liability from what’s left of the hotel to include the equity he has collected on the units he has sold.

Obviously, it takes an agreeable bank with whom you have a GOOD relationship.

It happens all the time around here on a smaller scale. We have thousands of “duplex condos”. In a nutshell, you can buy a duplex, take out a mortgage, then “condo” them, to sell each floor separately. When you sell one floor, the bank releases you from that floor, provided they have enough equity in the remaining floor.

Good Luck!

Mobile Home Park question - Posted by Mark (SDCA)

Posted by Mark (SDCA) on January 14, 2000 at 10:43:08:

I am in the process of buying a mhp. The park has 19 park owned homes. My intention was to sell all of them (preferably to the tenants living there) and just collect the lot rent. THe last thing I want to be involved in is renting mobile homes. What I did not know until yesterday afternoon is that most of the mobiles are encumbered by the 1st mortgage I will be assuming. It’s still a good deal so I will go with it. And I figure I can pay off the mobiles one by one out of cash flow, selling them off as I go, freeing up the last one in about 2 years or so. If that’s the worst case scenario, I can live with it. Anyone have any other input??



Re: Mobile Home Park question - Posted by Ray

Posted by Ray on January 14, 2000 at 19:35:26:

Don’t know how agreeable the mortgage holder will be to this, but it’s worth a shot, especially if there’s enough equity in the property.

Make them aware of your intentions of selling the MH and (assuming) carrying financing on them. That way, you still have the title on the MH. If they have to forclose on you, they will still get title to the MH, and a (hopefully) current loan from the MH buyer. Their position is almost as strong as before (maybe even stronger, depending on how you structure the MH buyers’ notes).

If they balk at that, offer giving them the down payment (or portion thereof) of each MH you sell to pay down the principal.

Best of luck. If you don’t mind, share the details of your deal so we can all learn from it.


Re: Mobile Home Park question (long) - Posted by Mark (SDCA)

Posted by Mark (SDCA) on January 16, 2000 at 09:39:22:

I don’t really understand #1. Letting me sell something that they have a lien on???

#2 is definitely do-able. I have a list of the amounts required to release each mobile home. Some of them aren’t very much though as the saying goes 1000 here and 1000 there and pretty soon you are talking about real money. What I am leaning towards now is just releasing them one at a time and then immediately selling them. On some of them the amount to release is as much as 3500 or 4K. I doubt I could get that down from a buyer. There are traditional Lonnie deals.

As for the deal… Here it is in round numbers… The asking price was 419K. The park has 22 spaces on which 19 park owned mobiles sit. The 3 other spaces are vacant. There is also a studio and 1bd/1ba house. The studio goes rent free to the manager. I will keep that deal in place, at least in the beginning until I find out if she is any good at managing. NOI is 49K per year. There is an assumable 1st of 283K.

I offered 370K, 35K down, assume the 1st, seller carry of 58K, 30 years 8% interest, payment around 450. I thought that was a pretty agressive offer. Still, that offer was accepted as is. (There was a counter with some details, changes in wording, seller wants to check my credit, 2nd is NOT assumable, split loan set up fees etc). I accepted their counter with one change. Seller wanted no grace period on the payment. I had originally asked for 14, settled for 5.
I am not sure why the seller was so motivated. The reason for selling as given was that he was retired, traveled a lot and didn’t want to hassle with an out of state park. I do know that the 3 vacant spaces were empty and that 2 of the mobile tenants had recently been asked to leave. So maybe management got away from him.
My plans:
Year 1: Recover my down asap. I will very likely try to fill those 3 vacant spaces with Lonnie deals here as well. Printed out a list of “For Sales” today in fact.
Year 2: pay off all the mobiles and sell them with Lonnie type financing.
Year 3: Sub-meter for water. This will save me 7500 per year in water costs. I should recoup the initial investment in a little over a year.