March 2007
Newsletter
This issue of the MobileHomeParkStore.com and MHBay.com Newsletter includes:
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In the past 30 days, there have been over:65 new mobile home parks listed for sale on MobileHomeParkStore.com and at least 19 confirmed sales. I listed a park on the site about a week ago and am expecting a signed contract today. I will have to pay myself the listing fee! Here is what Wayne had to say: 3-9-2007 Terri, I heard about your site 4 years ago and was too skeptical to try it. Now I am kicking myself for not trying it when I first heard about it. Thanks for the leads and the sales! Wayne |
Selling your Mobile Home Park: How would you like to try selling your mobile home park on our site for FREE for 15 days? No further obligation or strings attached! |
Are you looking at purchasing a park and want to get an expert to help with the due diligence? If so, I would like to introduce you to Frank Rolfe, the Deal Killer. He says: "If I can't find something wrong with the park... then buy it"! Frank is an experienced Mobile Home Park owner and speaker on Due Diligence at Mobile Home Park Investing Seminars. Whether you are new or experienced to the industry, his service is worth checking out. |
Are you a manufactured home owner or community owner with homes or lots for sale or rent? If so, then you can list your new and used mobile homes for sale or rent and lots for sale or rent for FREE at MHBay.com Our traffic continues to increase so if you are looking to connect to potential residents and sell or rent more homes, then place your FREE listings on MHBay.com. |
Q&A with DaveQuestion: Dave, I'm looking for someone to help me. I'm still having trouble running the numbers. If I were to purchase a MHP for $1600000.00 and it had a cap of 10%, I put down $100000.00 and financed $1500000.00 my debt service would be about $130,000. if NOI is $160,000 I would only make about $20,000-$30,000 a year. That seems awful low for the head ache of a 50 unit park. Other figures with a 10 cap rate yield between $15,000- $30,000. Am I missing something? I could invest $100,000 in any small franchise and make more on my investment. Thanks for any help you may give, everybody at the conference seemed to think MHPs are the ideal investment. I'm retired and not interested in turn-arounds. I just want a good return to live on. I have a little over $200,000 to invest. Any suggestions? Tim Answer: Tim, I will try to answer your question and offer my input. First, suppose you were to buy a park as you indicated. $1.6 mil, NOI of $160K. There are some park lenders out there that will finance up to 90% so you will most likely have to put at least $160K down and finance the balance. Suppose you can get an interest rate of 7.25% amortized over 25 years the payment would be approx $125K per year which would put $35K in your pocket. $160,000 down and $35K spendable cash would be a cash on cash return of 21.88%. It does not end there. Suppose you attribute 2/3 of the value of the park to land improvements and depreciate this over 15 years. This would give you a depreciation deduction of approx $70K and after subtracting this and the interest on your loan (approx 100K), you would have a loss of $10K to offset other income. In addition, you should be able to increase the rents each year and based on a 50 unit park and a $10-15 increase, that would increase your income each year by $6,000+ as well as the value of the park by the corresponding multiple. Sure, you can buy other franchises and possibly make more money with them but based on my experience in running other businesses, mobile home parks have very little headache especially for a stable park that is not a turnaround. Of the 10 parks I own, I may spend about 2-3 hours on each of them per month with another 2-3 hours spent by my employees in Colorado. To eliminate your headaches, you need to find a good manager and put a system in place. If you are going to run the park yourself, then you should be compensated for your time as a manager. This amount should have been included in arriving at the NOI in the first place. I am not promoting mobile home parks over other investments for everyone because we all have different goals and reasons for investing. Mobile Home Parks have been great investments for me and as long as you purchase a good park in a good market at a price you can earn the returns you desire, you should do well. I hope this helps. Thanks, Dave ---------------------------------------------------- Question: Dave: My Partner just came back from the mobile home university meeting in San Diego. There he was informed that most of the participants did not use foundations. Frankly I do not see mobile homes without foundations in areas like the northeast northern central states or northern western states. Could you enlighten me with your experience as to foundation requirements or use in various parts of the country. Thanks for your help. It also seems to me that without a foundation financing would be close to impossible? Rick Answer: Rick, I have owned over 30 parks and to my knowledge, there was never a manufactured home on a foundation in any of these nor a requirement by the city, state, or other governing body. Not to say restrictions such as this do not exist, they are not prevalent. You will run into this more on newer parks and also land/home financing. There are more lenders out there for homes on foundations as many of the manufactured home lenders for homes in parks have folded in the recent years. Thanks, Dave ---------------------------------------------------- Question: Dave, I am surprised at the response due to the fact that in the areas we live in and the constant temperature variation that there are no foundations. How do you maintain level on the trailers in a fluctuating environment? The freezing the thaws, the spring run off. There has to be some form of stabilization. Are the trailers set on cinder blocks which are on individual footings? If the are how much does it cost for each trailer? Rick Answer: Rick, In most cases, the trailers are set on cinder blocks on top of dirt, gravel, road base, cement runners, cement footers, or a cement pad. The softer the ground the more likely it is that the home will have to be re leveled from time to time. I have probably done this or seen it done about 10 times in the past. If the home is on cement runners or a pad, then this is unlikely to ever have to be done. There are companies that sell other types of footers as well as alternatives to the cinder blocks. It just costs more to go this route. It typically costs about $600 to $1,000 to set a trailer and tie it down. Thanks, Dave |
Mobile Home Park Investing E-book!Written by Dave Reynolds, MobileHomeParkStore.com, LLC December 21, 2006 Available for Instant Download!
Find out more about the Mobile Home Park Investing E-book! |
| Dave: I'm an old retired newspaper guy looking to buy an RV park in the Texas-Arkansas area and I downloaded your mobile home investing book that I saw advertised on the RV Campground Store web page that my wife found on the internet. Hey, I can't put it down. Good stuff! Looks like a lot of the information also pertains to RV campgrounds. You have a knack for putting complicated dealings in easy-to-understand language. Thanks for all the info. Regards Ken /Rigby Idaho If you are looking for a book more on RV Parks and Campgrounds, then check out my newest book on How to Buy, Sell, and Operate RV Parks and Campgrounds How to Buy, Sell and Operate RV Parks and Campgrounds |
Differences between buying a Mobile Home Park versus an RV Park When considering the purchase of a mobile home park as compared to an RV park there are many factors to consider. While mobile home parks and RV parks are often sold by the same brokers and are combined in one facility, they are not the same and both require different amounts and types of management. The following comparisons are for Overnight/Destination RV parks as compared to the typical mobile home park in which the lots are rented out on a monthly basis. In many cases, the seasonal or extended stay RV parks will have more of the qualities of the typical mobile home park rather than those of the Overnight/Destination type RV parks. Length of Stay: Mobile Home owners are in the park permanently or at least until they sell their home and move somewhere else. RVer’s are in the park for usually a week or less. The longer a home or resident stays in the park, the more likely it will have the qualities of a mobile home park and the less time a home or resident stays in the park, the more likely it will resemble the operations of an RV park. Management: This is probably one of the most significant differences between RV and mobile home parks. In most cases, it takes less time and manpower to run a mobile home park than an RV park. There are several factors for this:
Ease of Movement: While it will cost an owner of a mobile home 1-2 thousand dollars or more to move their mobile home out of the park and set it up somewhere else, the owner of an Recreational Vehicle can hook up, move and reset their RV up in another park in a couple of hours or less and for the cost of gas. Thus, you have to work much harder at keeping the RV’er satisfied with the park if you want to keep them there. Eviction: In a mobile home park if you have someone that is not paying rent or causing other problems, you will have to go to court and deal with the judges and it may take several weeks to have them evicted out of the park. However, in an RV Park, the rent is usually paid in advance and if it is not paid, you should be able to have the RV removed immediately for lack of payment or other issues. These laws differ from state to state so make sure to check first to stay legal. Rent Control: RV parks owners are not typically subject to rent control ordinances as are mobile home park owners. Utilities: In a mobile home park the park owner will generally only pay the utilities for any common areas and buildings as well as for street lights. The individual mobile home owners will pay for their own gas, electric, water, sewer, cable, and internet. However, in an RV Park, this is all bundled up in a nightly or weekly rate and that rate should be adjusted to include all these utilities and amenities. You might shudder when a big 40’ rig pulls in the middle of July and powers up a couple of a/c units after plugging into your electric pedestal. Other Improvements: While both RV & MH parks will have the sites, utilities, roads, it is common for RV parks to also have a store, recreational hall, and restrooms and showers. In addition, a higher percentage of RV parks compared to MH parks will have a swimming pool and other recreational facilities such as shuffleboard, basketball, and video games. What this will equate to is once again, more management time and energy. An RV Park of 400 spaces will probably have two to three times more employees than a comparably sized mobile home park. Taxes: Just like the taxes you pay when you stay at a motel, you will pay taxes to stay in an RV park. Usually the only way around the lodging/transient tax is to stay for 30 days or more. The residents in a mobile home park are not subject to this type of tax. They are just subject to the yearly mobile home taxes to the county treasurer. The park owner will pay the taxes on the land (dirt and improvements) for both MH & RV parks. Capitalization Rate: Typically a mobile home park will sell at a lower cap rate than an RV park. There are always exceptions but this is the general rule. If a mobile home park is selling at a cap rate of 10% then an RV park in that same market area will typically be selling for a 11-13% cap rate. Smaller RV parks generally sell for higher cap rates than do larger ones. Destination and overnight style RV parks are generally priced at higher cap rates than the extended stay and seasonal type RV parks. Also, parks that are rated higher by Woodalls or any type of star ratings will generally sell for more $$$ (a smaller cap rate). Finding a Park to Buy: In my experiences as a broker, investor and by running the Mobile Home Park Website as well as the RV Park Website for many years, I have noticed that there are usually five times or more buyers out there looking for Mobile Home Parks than there are for RV Parks. What this equates to for the RV Park Investor, is that there is a better inventory of potential RV Parks to purchase as well as less competition. I have seen some very good RV Parks sit on the website for a few months and wonder why they have not sold. There are Great Opportunities out there especially if you are not set on one particular area. Long Distance Ownership: Mobile Home Parks are often owned by individuals or companies that do not live in the same city or state where the park is located. They hire an onsite manager and visit a couple of times per year. However, with an RV Park, most owners live at the park or nearby and are involved with the management of the park on a day to day basis. It is possible to run an RV Park from a distance but in order to do so you have to really trust your manager and other staff and have a good system in place. Financing: It is usually harder to obtain a loan for an RV park than a mobile home park and that is one reason why a higher percentage of owners offer to seller finance RV Parks as compared to Mobile Home Parks. When seeking financing on an RV park, you will be typically obtaining a loan with interest rates a point or two higher than that of a mobile home park. For many types of investment properties, the loan is based on the property more so than the purchaser. However, with an RV Park, the loan is not only based on the property itself, but also the borrower’s credit and experience in running similar types of businesses. It often helps to have a well drafted business plan when applying for financing. Excerpt from How to Buy, Sell and Operate RV Parks and Campgrounds By Dave Reynolds, March 26, 2007, 130 pages. |
Tell us what you think! We'd love to hear what you think of this issue! We need your articles - send your articles to dave@mhps.com to be included in upcoming newsletters. Please send your comments, questions, articles, and ideas for upcoming issues to us at: Your feedback matters to us! |
Until Next Time! Dave Reynolds MobileHomeParkStore.com 18923 Highway 65 Cedaredge, CO 81413 PH: 800-950-1364 FX: 970-856-4883 If you have received this mailing in error, or if you no longer wish to receive e-mail from us, please send an e-mail with "unsubscribe" in the subject line to dave@mhps.com You will be automatically excluded from any future mailings, including our Newsletter. If you would prefer to unsubscribe via postal mail, please contact us at: MobileHomeParkStore.com 18923 Hwy 65 (PO Box 457) Cedaredge, CO 81413 |