November 2007
Newsletter
This issue of the MobileHomeParkStore.com and MHBay.com Newsletter includes:
|
Finding and Evaluating Mobile Home Park Investments By Dave Reynolds Of all the questions I receive from investors that are looking to purchase a mobile home park there are two questions that are asked most often:
These are important questions and there are several ways to find mobile home park investments and even more ways that one can approach evaluation of that investment. When I first started in the business about 12 years ago, I spent a lot of money driving across the country looking at listings I found in major newspapers and on the internet. While this allowed me to see a lot of potential deals, it was a big waste of time and money. Many times I would get in my car and drive 1,000 miles only to find that the park I was looking at was a complete dump, had unrealistic profit and loss projections, or was already under contract by another investor. I soon realized that it was worthwhile to do a more thorough analysis before visiting the property. If it passed the initial analysis, then I would try to get an accepted offer and request detailed financials from the seller. If it still looked good I would schedule a trip to visit the park. Before implementing this strategy, I was visiting about ten parks for every one I purchased. Now, that ratio is more like two-to-one and I am not on the road all the time. If the mobile home park looks good on paper, get it under contract before spending $1,000.00 in travel and two days to visit it! In order to find a mobile home park that makes sense financially the most important part is to be able to quickly identify and separate the good deals from the bad. The only way to acquire this skill is to educate yourself on this business (through books and other resources) and start looking at as many mobile home park offerings as you can. With the availability of information on the internet you can accomplish this task quickly. Go to www.mhps.com and other internet websites where you can view over a thousand mobile home parks for sale. Whether you are a new or seasoned investor in this asset class I would suggest getting the information on as many properties as you can and then put them side-by-side and analyze each one. You will get an idea of the capitalization rates, expense ratios, occupancy levels, and rental rates for different markets. You will find prices all over the place but if you invest the time and effort in evaluating deals, you will start to develop an idea of what to look for in terms of price-per-space, how park-owned homes affect values and other important factors. Invest the time in evaluating as many deals as possible and invest the money on properly educating yourself on the business so that you can separate the good deals from the bad and concentrate on those with promise! So where is the best place to find a mobile home park to buy? The best answer to this question is that you should try as many logical approaches as possible. As mentioned above, I would suggest you start by checking out the websites that have thousands of mobile home parks for sale like www.mhps.com and other commercial real estate sites. There are new parks listed daily on these sites and the best way to utilize these services is to sign up for notification of new properties for sale. This way you have a better chance of jumping on the good deals before they are available to the general public. I have purchased over 50 mobile home parks over the past 12 years and about 15 of those purchases came as a direct result of listings on the internet. The next strategy that I would suggest is to start a direct mail campaign to mobile home parks that are in the markets and states that you are interested in. This has accounted for about 20 of my 50 mobile home park purchases. If you obtain a good list of addresses, you can target mobile home parks with a certain number of spaces in select markets expressing your interest in purchasing a mobile home park. I have experimented with postcards, letters, and even actual purchase contracts and have found that the response is about the same for each of these. The key has not been in the type of piece but in the frequency of mailing. I have received many calls from mobile home park owners saying that they have received our numerous mailings over the years and are giving us first shot at the park since they know we are a legitimate company. I actually had one seller pull out a file included over 25 mailings from us. In another instance I mailed out 1,000 letters to two states expressing our interest in buying mobile home parks. I followed this up about 2 weeks later with the same mailing piece (in error) and found that my response rate was about 100% higher from the second mailing. So the key with direct mail is in getting a good list to mail to and frequency. There are several other options that I have used with varying degrees of success. I have listed some of these below.
The key to locating good potential mobile home parks investments is to be diligent in your search and use whatever methods work best for you. The best deals are usually found by finding those parks that are the least advertised. So how do I determine what a specific mobile home park is worth? That will be the subject of next months newsletter. |
Quick Mobile Home Park Deal Evaluation Quickly and reliably get the answer to your question: Is this a good deal or not? Do you have trouble deciding if you have a good deal or not? Do you waste your time evaluating and re-evaluating your deal only to come up with no clear answer? Would you like a second opinion from the professionals before moving further? |
The first Frank and Dave Show was a success. You can find out more and sign up for future segments here. Mobile Home Park Teleconference The next 2 hour show is on November 28, 2007 at 7pm eastern and will include such topics as...
|
10-15-2007Terri, The 3 parks for sale I had listed on your website sold last Friday. I had a tremendous response from the ad on your site and sold the parks as a result of the ad. I have told my broker that we must list all of our mobile home/ rv park listings on your site as the results are fabulous! Thank you, Sandra ---------------------------------------------------- 10-11-2007 Hi Terri, I wanted to add this park and one other one to your site. I get a lot more traffic to my parks on your site than Loopnet. (That's what I like to hear!!!) Thanks, Stewart Phillips The James Company 423-544-0002 ---------------------------------------------------- 10-31-2007 Hello, My name is Pamela Mets and I have had a small mobile home park in Circleville, Ohio advertised on your website for the past few months. I just wanted to say I received a tremendous amount of response, so obviously your website is quite successful and useful to others. Also wanted to let you know you can remove my ad from your listing. I actually closed on the sale of the park yesterday. Thanks so much for your assistance. Pamela Mets Paradise Properties |
| Find out more about selling your mobile home park! |
Mobile Home Transporters/Movers: We are in the process of creating our lead system to bring you more customers. If you want more leads and customers from MobileHomeParkStore.com then email terri@mhps.com for more information. You don't want to miss out on this as the spots are filling up fast. |
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 We listed over 400 new homes on the site in November so far! 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. |
BEING SOFT ON COLLECTIONS DOES NOT HELP ANYBODY By Frank Rolfe When I first got in the mobile home park business, I was very inexperienced in collections. My natural instinct was to be nice to my customers and never offensive. So when I first encountered customers who would not pay their rent, I did not want to offend them by filing evictions. Instead I tried phoning them or sending reminder letters. Time marched on. After they promised to pay several times and still never did, I realized my methods were not working and that I would need to “toughen up” and change my ways – and I started filing evictions as soon as I could once they had failed to pay on time. You know what I discovered? I discovered that this was the best thing for all parties involved. Here’s why: Some people need strong direction. Just like kids in school, some people need a firmer hand. Your filing of eviction may be the trigger that the tenant needs every month to pay his rent. Once you let a tenant get more than one month behind, they are doomed. I learned early on that most mobile home and trailer park residents have great trouble saving money, or showing a surplus from their paycheck. If you let them get more than one month back (and one month is pretty bad too) they will never be able to get caught up. You are actually doing them a disservice if you let them get behind. They can adjust their spending priorities or borrow from relatives and get current if you get tough early on. Think of your own mobile home park mortgage. If you let yourself get three months behind, could you get current overnight? Being tough on collections trains all of the tenants on the correct spending priorities. Those priorities should be their taxes, housing, auto payment, insurance, gasoline, utilities, and then all the other fun stuff like cell phone, beer, etc. Not to sound like there is some great “bettering the world” angle here, but maybe their lives will be better because you taught them this lesson. It is not fair to the other tenants if their neighbors don’t pay rent but still get to live there for free. Not only will everyone stop paying eventually when the word gets around, but it is just not morally right. Being tough on collections, believe it or not, is the only fair way of dealing with the issue. If the tenants don’t pay you and you can’t pay your bills then the park will shut down and nobody will have a place to live, or they will have to spend $3,000 moving their trailers to a new mobile home park. Most everyone flourishes in consistency. If the tenants know the rules of how things operate, they are better at meeting the rules and feeling secure. This is true in any enterprise or relationship. If the tenant knows the rent is due on the first, late on the 5th, and they get evicted on the 15th, then they know what to do. When you make payment plans and are soft one month and tough the next, everyone is confused and unhappy. It is also important to remember that a tenant who does not pay their rent on time, but does ultimately pay their rent, is your most profitable customer, assuming you have a significant late fee. You should not become discouraged if many people do not pay on time—you should be enthused! Those late fees are straight profit. So don’t be afraid to be tough on collections. You are really just following the natural order and it will be a win/win solution for everyone! |
Q&A with DaveQuestion: Hi Dave, Thanks for all the information in your courses. Your seminars are very helpful and have pointed out several issues that I would not have thought of had I not purchased them. So, I’m thinking that if I do purchase a park, you’ve probably saved me a few thousand bucks and maybe more. I have a few questions for you. Why are you doing this? If you’re not already a multi-millionaire, I don’t want to be in this business, so I’m really curious. I’m seriously considering purchasing a park and having a go at it. I have the financial ability to do so and I think that it’s a good move. My dad made a pretty handsome sum in real estate and he told me once that mobile home parks and self storage units were the way to go. He never did it, but after looking at the numbers, I’m thinking he was a pretty smart guy. So, what other services do you offer? There are a number of parks on your site right now that I’m interested in, can you help me get going and what keeps you from buying them from underneath me? Regards, Jim Answer: Jim, You are welcome for the information. As far as why am I doing this...I initially thought about doing this several years ago but never had the time. After talking with Frank Rolfe on several occasions, we decided to launch our own educational products. Frank and I both enjoy teaching and helping others out and making money. It is not that I/we needed the money but more of a part-time hobby that is really taking off. I continue to buy parks and just closed on one last month and have two more set to close before year end. The mobile home park business can be extremely profitable but only if you know what to look for and what to look out for. There is always some degree of risk and you just have to weigh those risks as you proceed. As far as other services, we offer due diligence consulting, park turnaround consulting, and deal review consulting. I don't have the time or desire to buy all the good deals out there and many of the parks on the site currently need some negotiation on price to be worthwhile. There are a several parks that have promise on the site and I have seen more good deals in the last few months than in the last year. I think things are turning around. Hope this answers your questions, Dave ---------------------------------------------------- Question: Terri, Do you know of any place to get a management contract for use between a park and it's manager? I am hiring someone that would like a contract. Thank you, Brad Answer: Here is a copy of a simple mobile home park manager's contract that I have used. Mobile Home Park Manager's Agreement Thanks, Dave ---------------------------------------------------- Question: Hi Dave, I bought your material and have been through it. We have our first park under contract. 79 lots for 1 million. It has 17 park owned which 8 are vacant. There are 15 empty lots. I don't want the expense of maintaining the park owned homes. Should I offer to increase lot rent by 50 for a couple years and tell them they own it or sell it to them for a dollar and have them be responsible for repairs. How do I fill the vacant lots. Should I buy used homes and sell them. Can they be sold, I'm not sure these people can get 15,000 loans. The water and sewer is paid by the park at 30k per year. you said it's about 200-300 to meter it. Should I do it right away or gradual. Also should I lower the lot rent when I submeter. First park Dave I appreciate your advice. Mike Answer: Mike, Congrats on the first potential park. As far as the park owned homes and getting them sold, it would make a difference on what they are worth on how I would approach it. Typically, what I would do is convert them from rental to sales. I like the idea of increasing the rent on the lots and selling at a discount (whether it is a dollar or $100 for 2 years). Most people would jump on that if it meant their payment would stay the same or decrease. Example: on a home that is rented at $500 per month and the lot rent for the rest of the park is $200. If the home is worth $2,500 then I would raise the rent to $250 per month on the lot and then drop the payment to $450 per month with the other $200 going towards the $2,500 value of the home. After 12 1/2 payments they own the home and just pay the $250 per month. At that time, I would just leave the rent at $250 instead of dropping it to what the rest of the lots are paying. You can go to the rest of the lots at that time and raise there rent to $250 and claim something to the effect that other people are already paying the higher rent. As far as filling lots, unfortunately right now it is hard to get people to move homes into the park. You can try ads in the paper, flyers at the dealers, etc but to set the process in motion in most areas, you have to buy new or used homes to fill up the park. You will probably have to finance these home sales to your buyers unless you can find a local bank that will make the loans (maybe with a guarantee by you). On the meters, first check the local and state laws. I would add the meters as soon as you can as they have a quick payback period. The last meters I put in in Nebraska cost about $90 and I had a plumber install them for $85 each. I have paid as little as $125 and as much as $250 in the past but it should be in that range to have them purchased and installed. Whether or not you should lower the lot rent will depend on where your park is with the market. If it is at the top of the market then you probably should lower the rent. You might lower it about 50% of the average anticipated water/sewer bill. So, if the average bill in the area is $40, you might lower the rent by $20. A lot will depend on your goals with the park. If you want to increase occupancy then devote your time and resources into buying homes to fill lots. If it is short term cash flow, then I would do the meters first. Thanks, Dave |
 |
Tell us what you think!We'd love to hear what you think of this issue! We need your articles and press releases - send your articles to dave@mhps.com to be included in upcoming newsletters. Where else can you put your press releases and articles in front of thousands of people for FREE! Please send your comments, questions, articles, and ideas for upcoming issues to us at: dave@mhps.com Your feedback matters to us! Visit us at www.mhps.com or www.mhbay.com Until Next Time! Dave Reynolds MobileHomeParkStore.com 18923 Highway 65 Cedaredge, CO 81413 PH: 800-950-1364 FX: 970-856-4883 |