Posted by Mikeb on February 16, 2000 at 17:47:17:
Posted by Mikeb on February 16, 2000 at 17:47:17:
sizing up the mh park - Posted by Gator
Posted by Gator on February 15, 2000 at 08:49:37:
Just doin some preliminary work on a mobile home park I’ve got a line on. Figured I’d get some of ya’lls opinions. I know I haven’t got all the info I need but just though I’d throw it out there and maybe we’d all learn something. Anyway, the details – 28 lots total, 19 rental homes (70’s models). 8 lots rented at $125 month. 19 homes rented at $100 week. Owner pays all water/sewer $1200 month. Not metered seperately. Owners pay rental homes utilities (gas & electricity) up to $100 each per month. Homes value probably $1500 each. Park and homes are decent & clean in lower middle class area of town. Game plan would be cleanup, landscaping, underpinning, painting, seperate water meters, polish rental homes as they become vancant and Lonnie deal them. The really bad part is its 2 hours away from where I live. Got a good fellow in a park I own that will drive up and manage/collect/maintenance but the distance still bothers me.
So OK hows it sound? Go ahead, ream me a new one. I can take it. Tell me I’m crazy or stupid. It won’t be nothin my wife hasn’t already told me. Hound says I’m crazy too. He says he ain’t ridin that far and spendin the day in a mobile home park. How the potential sound pros? Ottersburg, Segars, Alcorn… you out there?
Ray@lcorn post: Can’t find it. - Posted by Mikeb
Posted by Mikeb on February 16, 2000 at 15:20:20:
I don’t know if you remember seeing it, but Ray made a nice post on upgrading a park to separate water meters. I believe it was sometime back in the summer but I just spent the last half hour looking in the archives and can’t find it.
The post was very descriptive and included costs, but I didn’t save it and now I can’t find it.
If anyone saved this or can track it down please let me know. I’m planning on using Gator’s MHP info. and Ray’s water meter conversion info. to write a case for my finance class at school.
Careful is the naked man climbing a barbed wire fence - Posted by Gator
Posted by Gator on February 16, 2000 at 11:39:53:
Thanks for all comments. My major experience is in rehabs and rentals. The mobile home business is only a couple of years old for me and I am rather cautious. I have a tiny little park and am wanting to expand. Will try to post more info on this deal in the future. Special thanks to Doug Ottersburg. Rarely have I met a businessman so savvy yet so willing to help others. Doug you are now an honorary Southerner which comes complete with a Velvet Elvis Picture and a Dale Ernhardt license plate. MikeB, you scare me. I remember a chat with you long ago. Your knowledge is increasing much too quickly for my own good. Thank goodness youre on the other side of the smoky mountains, I don’t need the competition here. Best wishes to all,
Re: sizing up the mh park - Posted by David Alexander
Posted by David Alexander on February 15, 2000 at 18:12:48:
Looks like a slam dunk deal to me. Based on what you’ve shown and about 35-40% expenses. I the same as the other guy havent bought one yet but and working hot and heavy on it. Have been working the spreadsheets on several real deals hard.
The only thing I see is that you put some money in fro outside management based on giving the lot rent, maybe a Home to live and a few extra bucks, if you dont end up paying them but the space rent to carry around keys and do evictions you’ll be that far ahead of the game.
And of course you know about valuing the MH’s themselves, no you wont lose their.
Just be sure as your negotiating you buy on the present condition not on the future condition, almost made that mistake.
Re: sizing up the mh park - Posted by Eric Anderson
Posted by Eric Anderson on February 15, 2000 at 15:50:09:
I’m on the trail of a park that sounds almost identical to the one you’re working on. Except its about 500 miles west of where you are.
In about three weeks I’m going to hop in my buggy and roll on down there to look it over again. Could I please have a workable email address, and maybe a phone number; so we could discuss these parks on down the road. Sure would appreciate it.
Re: sizing up the mh park - Posted by Michael
Posted by Michael on February 15, 2000 at 13:51:49:
Seems your concern is distance from the facility…if you own other parks, as another person suggested, how often are you required to be on site for those? I would expect the same from this one, and that should give you an idea…plus 2 hrs drive time each way…
Interested to hear how it comes out.
Re: sizing up the mh park - Posted by Mikeb
Posted by Mikeb on February 15, 2000 at 13:21:54:
I’ve only been at it with the mobile homes for 11 months now. I have some rentals and I’ve also done some lonnie deals. I’ve been happy with my progress so far. ButI realize that this limited experience doesn’t qualify me to give anyone advise on valuing mobile home parks, particularly you who I know to be an experienced investor. After all, you own mobile home parks, I don’t.
Having said that, I did take the time to work through your numbers as a learning exercise for myself. There are many parks like this in my area (SC) as well, and I expect to be in a position pretty soon to be looking for one of these myself.
Since I had these figures sitting in Excel anyway I copied them over. Maybe one of you experienced investors can tell me if I’m thinking the right way.
You didn’t say in your post what your taxes and insurance costs are. I wanted to have some numbers to work with though, so I just made them up. The tax and insurance figures I made up for the trailers are typical to what I pay around here. If you have any real figures for taxes, please post them. I’d like to work through it again with real numbers.
As I’ve said, I’m posting this as an exercise for myself so please take it for what it’s worth
Lot Income $1,125.00 (9 lots @ $125/mo)
Rental Income $7,600.00(19 x $400)
Total Inome $8,725.00
gass/elec $1,900.00 ($100 x 19)
park taxes $166.00 ($2000/yr)?
taxes on homes $237.00 ($150/home/yr)
Insurance(park) $233.00 ($2800/yr)?
manage/maint $1,745.00 (20% gross)
vacancy $872.00 (10% gross)
Total Expenses $6,574.00
Net Income/mo $2,151.00
$2151.00 X 12 = $25,812.00
$25,812 / $150,000 = .17 ROI
$834.00 Per mo PCF
I just used these easy to figure terms to come to some kind of payment to use in this exercise. I realize your terms might be more complicated/creative.
One of the main lessons I’ve gotten from some of Ray’s posts on this subject is that you don’t want to include the income from the rentals in determining the park value. You’ll pay way to much for them if you do.
I think when figuring the park’s value you should use income based on the lot rent for the 28 lots minus expenses (excluding debt service) to come up with a NOI. Then you can figure lot value based on a suitable cap rate.
Once you have this figure, you add the market value of all the old trailers (I think you said $1500 a piece?) and this should be your asking price.
If I’m way off in my thinking, someone please let me know!
As far as the upside potential You’ll have to figure the cost of the water meter conversion and compare that to the expected benefit to determine if its a worthwhile project. Do you think you could raise lot rent after your cosmetic improvements? Is lot rent more than market because water is paid? If your tenents payed their own water would you have to decrease lot rent to stay competative with other parks? Just some thoughts.
Size up the Owner First - Posted by DougO(NM)
Posted by DougO(NM) on February 15, 2000 at 12:56:58:
Why are they selling ? What do they want ? Will they finance ? What exactly are ALL the expenses? I just did a quick calculation using some guesses on on expenses and such (DON’T YELL AT ME RAY!) to play WHAT IF, and IF you have 28 sites at $125 (This assumes noting about home rental and/or sales income) site rent, and IF the expenses were around 35%, and IF the owner would carry at 8% for 180 months with 10% down and IF you paid $150,000 and IF you had 10% vacancy, then IF all those things were true, that would show a cap rate of about 15% and a Cash on cash return of about 50%. I like your plan, it’s a good one. Now you just need to nail down “how much down & how much a month” that owner needs to feel GOOOOOOOOOODDDDD!
Go buy them a beer and some of those pickled eggs and find out !
Later Gator ! ; )
Re: sizing up the mh park - Posted by Mark (SDCA)
Posted by Mark (SDCA) on February 15, 2000 at 11:19:31:
You are on the right track in terms of a strategy. No way do you want to be in the mobile rental business. I wouldn’t worry about the distance. You are going to want to get an onsite manager anyway. And since the people living in the mobile homes will be owners, not tenants, your maintenance/management headaches will go way down. And your electric bills should go to zero. I would try to get the water bills to go there as well. Is it separately metered for water and electric? SO far, it all looks good to me. THe one question is about the financing. How are you going to pay for it? Will the seller carry?
geez - Posted by Gator
Posted by Gator on February 15, 2000 at 09:07:34:
Small detail. Asking price is $150k.
Here’s Ray’s Submetering Response - Posted by PeteH(NYC)
Posted by PeteH(NYC) on February 18, 2000 at 10:10:55:
This one was too good not to save:
Ray?s response to a question about sub-metering water bills:
We?re expecting about the same payback time on our system. We also looked at using our own crews to put the system in. There are a couple of things we took into consideration before deciding. First, we wanted a turnkey job that included billing and collecting. Second, we wanted the type of system that did not require a person to read the meters. Third, we wanted a system that did not require any modification to either our parks supply lines or the tenant?s home.
The company we went with, out of two we found in the country that will do small parks, offered a great deal on the equipment that included installation. The labor end of the deal, is not really as much plumbing (though there is some) as it is like installing a radio system. The system we found that met our needs was beyond the range of expertise we had available on our maintenance crew.
The system works like this:
Each space has a sensing unit that reads the water usage in the supply line below the cut-off for the home, and a sending unit mounted on the home itself that actually sends the usage info to a signal repeater mounted on telephone/power poles in the park, which sends the info to a computer based in the park. The computer is attached to a modem, and the billing company calls the computer once a month to get the usage. The computer generates the bill based on the same charges we are charged by the provider (state law prevents us marking it up), and sends it to the tenant identified with the space on the rent roll. The tenant sends the money in to the company, and they cut us a check once a month. We pay the water/sewer (this park has septic systems, so there is no sewer bill, but if there were we would pass it on just like the water charges.) bill as usual, and the municipality supplying the water never knows there has been a change. The company is charging us three bucks per space (I think, I?ll double check tomorrow) for the billing and collecting. In Virginia, we can pass on two dollars of that to the tenant as a billing expense, so net cost to us is a buck per month per space for reading, billing and collecting. We can?t answer the phone for the billing questions or prosecute one bad check for that.
We modified all of our rental agreements to include language that treats the water payment as additional rent, so if they don?t pay, we take them to court for past due rent, not utilities. This is important, because in states with the UCC landlord/tenant law, there are different requirements for utilities versus rent. We can change our rent roll with the billing company as needed, though this park has little turnover and a waiting list to get in. The hidden upside to this deal is that the park will experience an immediate decrease in the amount of water used. All of a sudden, when that running toilet is costing Harry Homeowner instead of Leon Landlord it?s amazing how fast it will get fixed, and how much longer the car stays clean between washings. For a park like ours that has septic systems, we expect this to result in longer life and lower maintenance on our drainfields and tanks also.
Having said all that, there are systems that use mechanical meters, and are read manually. They are of course cheaper, and could be installed by a local plumber I?m sure. But those systems require maintenance and manpower, two things we did not want to burden a small operation with. If you would like the name of the company we dealt with, send me an email and I will give you the contact info.
Actual Number for… - Posted by David alexander
Posted by David alexander on February 16, 2000 at 16:33:50:
sub metering the water for one of the companies I checked on and that Ray referred to me is (972)503-2053
It’s about 250-275 a unit, they charge a $3.00 a month billing fee, .25 unit meter reading fee, $10.00 new account fee, $5.00 late fee, $25.00 nsf
They install the units, collect the money and bill your tenants. For the parks I’m working on it will be about a 100% return on my money.
the name of the company is National Water and Power.
Gee…Thanks…I think ! - Posted by DougO(NM)
Posted by DougO(NM) on February 18, 2000 at 19:47:55:
I like the idea of being an honorary Southerner…does that mean I get to have grits and bourbon for breakfast? The velvet Elvis painting will look nice next to my “Powerful Elvis Prayer” & “Our Lady of the Trailer Park” Prayer Candles I have here in the office.
So whadda gonna do with this park Gator?
THANKS! - Posted by Mikeb
Posted by Mikeb on February 18, 2000 at 18:52:18:
I knew someone would have saved this. Thanks a bunch!