Better late than never, … - Posted by Eric C
Posted by Eric C on August 12, 2003 at 01:36:37:
Hi Eddie -
Actually, I’ve never owned a MHP, but I’m still looking.
On the subject of rental MHs, I have to agree with Ray’s post and Johnboy’s earlier ones.
Personally, I don’t value all cash flows equally. To me, it all boils down to the stability (predictability) of the cashflow and the amount of effort (work) required to produce it.
Simple risk-reward. Yeah, I know everyone says that, but too few actually practice it.
Even so, I’ve known a couple of folks who have done pretty well with rental MHPs.
The first one used to rent his units out to migrant workers on a seasonal basis; and his annual net was in the neighborhood of 300K per year. Not bad for a few months work – but he also had to collect his rents with the help of armed guards, highly trained dogs (better and cheaper than the human guards by the way), and a well-worn shotgun.
The second guy was a real savvy operator. He came complete with the mortgage department of a major lender (when they closed permanently, he bought all the "good paper – and most of the “bad”, hired the best employees, and struck out on his own) and eventually owned several large parks. He had complete repair crews, excellent on-site management, and the means to both acquire units (and the paper) and handle all aspects of the business. He did better than the first guy, but he still worked too much (for me, anyway).
I tend to lean a bit more toward door number 2 – the second park operator. I don’t mind hiring employees to do the daily chores of running the business while I make it my business to do as little as possible.
Another thing to consider is that the less the income stream costs to produce (in terms of work/risk/effort), then the more value people place on it. And the more people who value it at all - read that to mean, increased demand. Generally speaking, of course.
For example, I can think of several small firms that make great profits for their owners, but which would have little or no interest for most investors. The personal attention (skills/talents/etc) of the owners are essential to the continuing success of these enterprises. Most investors just aren’t looking to buy themselves a job, no matter how attractive the salary might appear.
Smaller rental properties (multis, commercial) are often viewed in the same manner.
One of my favorite techniques is to locate burnt-out landlords and offer them a solution to their problem. These folks are often too tight (amateurish) to run their properties professionally (on-site folks, standardized procedures, maintenance schedules, etc). And although they may have been “milking” the property for years, they;ve also come to realize that the practice has taken a toll on both the property and themselves.
Bring these projects back on-line with a year or so of stabilization and you can then resell them to someone who will probably decide to scrap all those changes(and which attracted them to the property in the first place). They tend to think (just like the first folks did) that they can cut corners and make the place do even better. And for a while, they can.
But soon, the entire cycle repeats.
PS - if any or all of this is somewhat incoherent, I plead exhaustion as my excuse. Several hundred miles have passed since you posted your question and the hour is late.
One more thing, to make these smaller properties work, it’s also essential to know how to locate and target local investors with money. Once you know their budget restraints, you’re set.