I Am Gonna Go Forward With This 37 Unit Park
I have decided to begin the process to get this deal done. $400,000 asking price. No RE agent involved. 37 lots. A beautiful first class park on the water in Central FL. In the city, with all city utilities, own meters. It is right next to a city owned senior center with shuffle board, tennis etc.
My friend has owned it for 20 years and was happy with just half the lots rented. Never tried to fill the other lots. The numbers look very low cash flow wise right now since it is half full but the upside is large. Existing lot rents can be raised to reach the current market and the empty ones can be filled up easily.
Have a few questions:
1. Does anyone with experience in this field know a normal rule of thumb formula for MH park values, ex) 15K per lot etc.
2. Has anyone here used the lenders listed at the top of this page for their deals? [ Edited by JohnLocke on Date 02/14/2004 ]
That is about $10,800 a lot. What is the rental rate per month per lot and how many vacancies do you have at this moment?.
I have only bought two trailer/mobile home multiple sites in my life. A 50 unit and a combined 25 and 25 fixed. I began with an examination of the present vacancies, what the average price to rent was in the area and what is the present time problem in management that causes such a large vacancy factor?
Thats the start before you go forward to obtain financing etc. etc. Something is wrong, what is it? Can you correct it? how?
What facilities if any does the site have. A pool to swim, a sauna, Meeting Room, whatever.
On the water sounds great. How is it plumbed? Septic, are they mounded.
Love to be helpful but need information. These are rather specialized ventures out this way.
I bought in resort type areas. The one near Carmel was but very profitable. We did some interesting modifications very modernist.
I await your communication Lucius
Lucius. thanks for the response. To answer some of your questions: as stated above, all are on city utilities. The neatest thing is, there is a brand new multi million dollar, "senior center" or "community center" with several thousand sq. feet of meeting space next door (literally feet away). The senior center also includes a brand new shuffle board court and tennis court and a boat launching facility for the local chain of lakes. Of course I pay nothing for that facility (escept as a taxpayer as everyone else) because it is govt owned and managed for the entire community benefit. Just happens to be right next door to this MH park.
Current lot rents are below market due to owner not raising rents for years and years. He owns property free and clear and has owned it for twenty years. He never marketed the property much since he lives off site and just does not need the money.
Only half the parks lots are rented out or ever have been. And they only bring in $1,990 total. The rent is only $100 to $125 on each and could stand to be $200 easily. Maybe even $250.
I think the only reason he never rented the other lots is complacency. I have known this man for 30 years or so myself and the area is right up the street from where I was born and raised and still live.
I have met some of the people who live there and they are happy. Here is an example of one renter: She and her hubby own a really nice 70'sor 80's MH. Trimmed out nice with gorgeous yard and flowers etc. Concrete driveway and patio. They are retirees who only come down in winter. They drive a brand new Chevy truck (probably paid for) and are the kind of people you dream of for neighbors. Came down here years ago to do some of the legendary fishing in our local chain of lakes (the famous bassmasters world series type tourney was just held here last week). Getting the picture on this park? No "trailer trash" here my friend.
I have pics for the bank of the entire property and the senior center but not sure how to post those on here. Trust me, this place is first class.
Don't get the wrong idea here. I am not looking for a partner, had considered one once but want to go it alone. I just wanted to see who might know how to value the lots?
And, you know what? I have about talked my self into it anyway. Just need lender now. Owner will carry back 20% with interest only pymnts with a five year balloon so why not, right? I have the income from my regular business (insurance) to handle the negative cash flow until I get the other lots rented even if it takes years.
Again Lucius, thanks for your input. Look foward to more. I have read lots of your posts on this site and they are always respectful and insightful sir.
[ Edited by Ricker on Date 02/14/2004 ]
I am gonna try to put up some links to some pics of the MHP here:
http://www.momentoffame.com/snapshot.html?id=70810
http://www.momentoffame.com/snapshot.html?id=70809
http://www.momentoffame.com/snapshot.html?id=70808
http://www.momentoffame.com/snapshot.html?id=70807
[ Edited by Ricker on Date 02/15/2004 ]
Did some more investigating today. Lot rents in area at not as high as I had thought.
Next door is only $160.00 and they get free sewer, water, garbage and yard done!
Interviewed another owner today at the park. She gave me the low down on the whole park. Knows every neighbor. Mrs. Kravtitz is her name. Ya'll know her right?..... "Abner! There is something very strange going on across the street!" LOL [ Edited by Ricker on Date 02/15/2004 ]
In my humble opinion you need to work on your friend a little. How did HE come up with the 400k figure w/ only 1900 per month income? At full capacity and with a lot of hard work, you may get that 8550 per month income... but don't you deserve to get paid for your efforts? If he doesn't budge... and i am not saying that it is a bad deal... this may be one to go into with a master lease for whatever his net cashflow per month is currently,(he gets what he has now with no risk) and a buyout at such time as you have already improved the numbers. The way I see it now, is no lender that I know of will loan 320k on a negative cashflow property unless you are a strong player with the capabilities to handle it. No way of knowing that from the info you imparted. Structured properly this could be a great deal for both of you.
Good Luck,
Shawn(OH)
Thanks for the response. After today and checking out lot rents, I am sure about one thing, the current numbers are certainly not the best part of this deal. It looks like the main advantage of this deal is owning 18 lots zoned and ready to put MH's on that I will own and do "Lonnie deals" myself. I will just have to see what I can get loaned and go from there with my negotiations.
I received these three interesting responses today from a Mobile Home investing site:
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1. I like to use a "rule of thumb" ie. $X/lot when looking at lots in my area, just to see if it's worth persuing. But they vary from area to area. I own a park so I can ballpark the expenses and the cost of money. I know what kind of return I want, the management time involved and what the realistic rents are. I work that info back to give me a price range per lot and use that as my rule of thumb. Replacement value doesn't enter into the picture.
Having said that, the rule of thumb could be $6k/lot or $40k/lot, or somewhere in between, depending on what the conditions are in your area and your return requirements.
If you can "clear", after all expenses, $150/month on a lot, it would go something like this.
If you paid: $20k/lot your return would be 8.64%
$15k/lot your return would be 11.38%
$12K/lot your return would be 14.05%
$10k/lot your return would be 16.66%
The variables are how much you clear after all expenses and what you want your return to be. If those change, everything changes.
See Ray Alcorns articles about buying commercial property and figuring "derivative cap rates" available on this site. Ray's course "Dealmaker's Guide to MHP's" and Ernest Tew's "Getting Rich Helping Others" are both excellent guides for MHP purchases.
Joe C. (AR)
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2. "At $21,500 per lot... it would cost $795,500 to replace the park.
Get off your butt and get under contract."
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3. Good advice. Sounds ideal. [ Edited by Ricker on Date 02/15/2004 ]