Posted by David Alexander on March 12, 2000 at 22:47:16:
On these 8 wides, maybe sell them to people for use on construction sites or rehab them into mobile offices for construction sites and lease them out.
David Alexander
Question for Ray Alcorn - Posted by Mark (SDCA)
Posted by Mark (SDCA) on March 12, 2000 at 08:52:07:
I looked at a mhp yesterday which has tremendous cash flow potential. It is fairly clear to me what the current owner’s problem is, and I want to make sure I can solve it. The park owns 40 mobiles of which 1/2 are vacant. I broke down the vacancies by age and width (which correspond quite nicely as it turns out). What I am seeing is that the owner has zero problem renting his 12 wides. The 10 wides are a minor problem but the huge problem are his 8 wides. He has 15 of them and only 3 are rented. My question is what to do with these. I don’t know that moving out all 12 of them and moving in 12 12-wides is an option financially right now. (I would have to double check that the space would hold a 12 wide anyway- some of these spaces are QUITE narrow. He actually calls some of them travel trailer spaces). Any other options? If I did move them out, how would I dispose of them? They were all made in the early to mid 50s so their value is basically zero. Obviously, if I left them in the park I would offer owner financing to sell them. Would they sell easier than they are renting?? I do hate to see those metered spaces going to waste. Thanks,
Mark
Hi guys - Posted by ray@lcorn
Posted by ray@lcorn on March 12, 2000 at 22:06:30:
Mark,
40 MH rentals ain’t a mobile home park… it’s a horizontal apartment building! (smile) I’m assuming that you are looking to buy this park, and if you’re not, send me the address and I’ll pay a nice finder’s fee! (bigger smile!) You guys on the left coast ought to be locked up for the bucks you can make with a park. Talk about a franchise… the lot rents alone would buy a nice 3-bedroom ranch around here. The only business I know that has a better profit margin than a West Coast park calls their customers’ users. So let’s get to it!
I will also assume that you are buying the park based on the current cash flow, which of course would include the income from the rental homes. I won’t go into the whole discussion of how to value the thing because you didn’t ask and I suspect you’ve read enough posts on that subject to hold you for a while. So assuming you’re going into the deal with some positive cash flow, you have some options to work with.
There is no way I would sell the homes in place. That just perpetuates the problem, and leaves many thousands of dollars in profit on the table. Much better in my opinion would be to use the cash flow off the units that are rented to carry the park while starting clean-up operations. I would go into the deal with a plan to convert it to a total rental space park within a short as possible time frame. Reconfiguring the spaces would be a prime option. Be sure to check the local zoning regs for minimum space dimensions so you don’t paint yourself into a corner. Also, don’t forget to take a look at all surrounding land for any possibility of expansion, slim as the chance may be. I would consider taking the time and maybe up to a couple of thousand dollars to pay an architect to do some color renderings of redesigned space layout, new home elevations and park landscape improvements, featuring the way the park will look when the conversion is complete. Also write up a set of standards for all new residents moving into the park. Cover items such as skirting, uniform trash cans, no clotheslines, etc, etc. In short, let folks know that you are serious about cleaning this thing up and they can get in on the ground floor. Offer some incentives to the first five or so homes to move in. Reproduce the renderings, rules and standards in a sales brochure that would go to every dealer and potential resident.
If new home sales aren’t strong enough to fill the park, then you have some more options to consider. If you can’t buy more than a couple at a time to sell and finance, remember that the real goal is the long-term profit in turning the park around. I know you have said before that you need to build cash flow, but I really hate to see you sell a deal short and not take a route that builds cash flow AND value. It can be done. Another option to filling the spaces is to find a source of late model repos and strike a deal to let them set the homes up in your park rent-free until they sell. (I wouldn’t put anything less than a 14 wide in the park, regardless of year model.) Or make the same deal with a dealer (only one). In short, make some plans. Get a vision in your mind of what this place can become then get out of the way while every resource your mind can grab is used to make the vision real.
But the question of what to do with obsolete mobile homes is a good one. We have dealt with it in a number of ways over the years. Here’s a few ideas:
Giving them away only works for us when our favorite renegade MH mover runs out of work and needs something to do. He’ll haul them off for them if there is anything salvageable just to get the axles and frames. Other than him, the only offers we get when we try to give them away are people wanting to charge us to move them. We get better response if we advertise them for $199, or $349, or $296 each. Some oddball, too low to be true kind of prices. The ad has to SCREAM that it’s a DEAL. That brings out the vultures. They smell a deal with an ad like that, and come in loaded for bear. They grind away with offers like $150, or $50, and we hem and haw (not for long) and then take it. It’s even better when you can counter $25 higher with a straight face just to make him think he’s hurtin’ you. For some reason, that always gets them gone, when an ad trying to give them away won’t even draw flies.
Something else I have done with old mobiles is cut them in two and make construction offices out of them, then sell them to contractors. You have to weld a hitch under the rear section, and add axles to the front section, but with enough old homes to draw from you can come up with the pieces to make it work. This is especially doable with eight-wides, because a wide load permit isn’t needed to move them. I’ve also sold some of these units to car dealers as offices. But be sure you build it big enough to meet the minimum square footage for an office in the DMV regs. I found a couple of all around Mr. Fix-it types and made a nice side business out of it for a while in the eighties when interest rates were in the ozone. Here in VA we can get a “homemade trailer” title from the DMV for these units after surrendering any title we may have had for the units. (More often than not we didn’t have a title in the first place.)
Another option is to strip the mobiles down to the frames and sell the frames and axles for lowboys. Contractors are again good customers for these. Welding shops and rental equipment stores are good prospects for this. The bigger homes have too much steel and are too heavy, but eight wide frames are perfect. We also get calls from guys building trailers for race cars, though I don’t know how much demand for that is in SoCal. They especially like the ones with “saddle” axles. Those are the types of axles that hang down from the center of the wheel, letting the frame ride lower then normal.
Last option, and not doable in many parks because of the closeness of the homes, is to call the fire department and offer them as practice units. Not that they will jump at the chance to fight a mobile home fire? it usually doesn’t last long enough to get the hoses out.
Bottom line, get rid of the rentals as soon as you can, any way that you can. The value is in the spaces. But if you really don’t want to try anything like this, I’m serious about the finder’s fee!
Good luck,
ray
Re: Question for Ray Alcorn - Posted by DougO(NM)
Posted by DougO(NM) on March 12, 2000 at 11:31:17:
I’m not Ray but I have a suggestion none the less. If selling those older units in place with owner financing doesn’t/won’t fly, it sounds like this park may be a candidate for a re-configuration. (Combining several small spaces to create larger ones.) I know you’d hate to lose a metered space, but when faced with functional obsolesence, we don’t have many choices. I would suggest looking into park models, but those, while small, are not cheap. Also, the type of person that would buy a park model might not buy into moving into a rental “trailer” park. Is this in an area that would support a change in the park demographics ? If you are San Diego, you might check out what Dick Bessire’s company did to an old trailer park in Newport Beach. They reconfigured using the existing sites over time and installed cool little two story models from Silvercrest up in Corona.(though the price isn’t little on these units)
Food for thought
Doug
Genius… as always… more questions - Posted by Mark (SDCA)
Posted by Mark (SDCA) on March 13, 2000 at 09:45:07:
Believe it or not, he actually calls this a 65 unit park. But the only way that number works is if you count in the 8 wide mobile homes and the travel trailer- which I have zero interest in messing with. It does have a positive cash flow from the rentals- even 50% occupied- about 2.5-3K per month.
Here are my problems.
- The park isn’t zoned mhp at all. It is zoned multi-family and grandfathered in as a park. How much do I need to worry about that?
- Even the 54 spots that he advertised is pretty much marketing hype. Given the current configuration (VERY narrow vacant spots- really suitable only for 8x) I am figuring about 40 spots.
- I am really worred about the logistics. He has shoe horned 8x mobiles and travel trailers into every corner- even into normal sized mobile home spots. Plus, he has planted a bunch of palm trees all over the place (nice touch)- but it blocks off the front and back of the mobiles. So I am not sure 1) if 12 wide mobiles would actually fit (maybe too long) into the existing spots and 2) how I would get them in there. (A lot of the vacant spots have entry off an alley which is pretty narrow.
- It seems to me that moving mobiles around within the park would be a pain. That is the same as a buy and move right? $2000. How long would you expect a project like this to take? It seems quite… daunting to me.
- This park is actually in AZ not Cali. Does that change your thinking at all?
Thanks again Ray
Mark
Re: Question for Ray Alcorn - Posted by Makr (SDCA)
Posted by Makr (SDCA) on March 12, 2000 at 14:35:34:
I think you are right on the money across the board. The park can definitely use an upgrade. And the nighborhood absolutely will support it. This is clearly the ugliest property on the block. There are some nice, blue collar homes immediately to the east and a nicer park immediately to the north. You are also right about hating to lose the lot rent; however, after seeing the park, I would do it. Fill the spaces with mid 70s to early 80s models. There are a couple in there now, and the difference IS amazing. That was why I asked about disposing of the 8 wides. I have to do something with them. Is hauling them off to the dump an option? Any idea what that might cost?
Thanks,
Mark
First stop: Planning Dept. - Posted by ray@lcorn
Posted by ray@lcorn on March 13, 2000 at 12:19:53:
Mark,
I don’t know that it makes any difference whether this deal is in AZ or CA… my comments about SoCal were based on some of the high lot rents I have heard about in San Diego and San Francisco. As long as the numbers work and the market is decent then the location can be anywhere.
Mt first stop in any deal is the local planning department. I like to have a copy of the zoning ordinance and the comprehensive plan just because there is so much info about the community in the documents that affect real estate. In this case I would want to talk to the planners specifically about what happens with the grandfather status if you start an upgrade program. Reconfiguration of the lots will likely require some approvals as you get into moving new homes in, so better to know now what you’re dealing with. Many times a community will not understand that a grandfathered use generally insures the continuance of the status quo. That is to say that by not allowing the park to upgrade, there will likely be no change in the use. Other communities (like my hometown) would rather wait out the park until land prices get to the point that it is feasible to get rid of the park and build apartments. You need to know where this community stands. If they are adamantly opposed to any plans to improve the park, say that if you pull the old units out they can’t be replaced or only with onerous development standards, then I would scrap the deal. Life is too short to spend it in courtrooms.
If it just takes a rezoning, don’t let that scare you. The case can usually be made that the community will benefit from the improvements, especially if the place is currently an eyesore. Also, you are reducing the number of spaces, which for some perverse reason usually appeals to planners. This is the type of situation that is prime for profit if you look at it in the right way, and especially if you find that the zoning ordinance makes it tough to build a new park nearby. That gives you what I call a government protected franchise.
If the comprehensive plan has a section that pays homage to providing their residents affordable housing (most do… it’s kinda like mom and apple pie nowadays) then you can use that section to bolster your argument for cooperation. There is little debate that manufactured housing addresses affordable housing better than any other solution.
Your concerns about access to the spaces is a good question. My suggestion would be to take a MH mover out to the park with you for a visit and get his thoughts on how to best position spaces to allow for movement of the homes. If a few palm trees have to go, so be it. You can replant landscaping after the upgrade is done. You may also want to contact a local, small engineering firm (the big firms charge too much) that is familiar with the community’s development standards for MH parks. They should be able to give you some insight as to what will be involved in doing a reconfiguration as far as access, utilities and the like. Initial consultations are usually done at no charge, and if you put some thought into the questions you ask you can come away from an initial meeting with a wealth of information about the feasibility of the project. Take a survey or site layout with you, and a utility map if available.
As far as the expense of moving mobiles around within the park, it is not that bad. Usually we can get pull and drops done for a couple of hundred dollars, depending on what all is involved. If you’re talking about just pulling out the old units to strip or convert as I mentioned above, you may want to consider buying an old used toter (that’s what we call a truck that moves mobile homes) just to move them around in the park. We have one that isn’t even licensed for the road, and I doubt it’s worth over 500 bucks, but it is great for just moving homes around. You can always sell it when you get finished.
How long will all this take? Hard to say without knowing your market, but I would probably figure a couple of years to do the whole conversion. You could pull out the eight wides all at once if you have an exit for them as we discussed above. They are producing no cash flow, so the sooner the better in my opinion. The rented 12 wides I would stagger pulling out as the tenants moved out and only as you could stand the drop in cash flow. The bulk of the time will be required for the rent up of the newly configured spaces. If there are few vacant spaces in the market, you could have a situation where dealers actually pay you to reserve spaces for their new home sales.
Daunting? Good word… but if it was easy somebody else would have already done it wouldn’t they? What’s the old saying… “Why not go out on a limb, isn’t that where the fruit is?” (smile)
ray
Re: Question for Ray Alcorn - Posted by DogO(NM)
Posted by DogO(NM) on March 12, 2000 at 15:36:05:
>>That was why I asked about disposing of the 8 wides. I have to do something with them. Is hauling them off to the dump an option? Any idea what that might cost?<<
First thing I would do is ask a couple of scrap vendors how much they might pay YOU to come take these units away. I have to think that there must be some scrap value as far as aluminum, etc. If not, perhaps they might just come get the things if you give them to them.
Best of luck, this sounds like fun !
Doug