This issue of the MobileHomeParkStore.com and MHBay.com
Newsletter includes:
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Important updates, news, and new features
of MobileHomeParkStore.com and MHBay.com
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Questions and Answers with Dave
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Mobile Home Park Investing Ebook
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Buying a Mobile Home Park versus RV Park
by Dave Reynolds
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Tell us what you think and send us your
articles!
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:
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
(March 9, 2007)
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!
Find out more here about this special offer!
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.
Find out more about this Frank's Due Diligence Service
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 Dave
Question:
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!
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How I Started in the
Mobile Home Park Business with Credit Cards
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Why you should invest
in Mobile Home Parks
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Over 15 strategies to
find Mobile Home Parks to Purchase
-
Valuation of Mobile
Home Parks (with or without park owned homes)
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A list of over 50 Due
Diligence items
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Powerful ways to
Increase the Value of your Mobile Home Park
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Financing, Insurance,
Management, and much more!
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:
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With a mobile home park, the manager
will typically see the residents of each space only once per month
when the rent is paid and anytime there is a problem. However,
with an RV Park you may have a new camper in the space every day or
every few days. You may have to acquaint them with the park,
the facilities, and in many cases the area. How to get here or
there, where to eat, etc.
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In addition, many RV parks will have
showers and restrooms that need to be cleaned several times during
the day. Most mobile home owners have their own showers and
toilets.
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In Mobile Home Parks, the manager
usually only maintains the common areas and the residents maintain
their own spaces, etc. However, in an RV Park, the manager
will not only maintain the common areas, but should check each space
to make sure it is clean before renting. As before, these
spots may have a different RV’er each day and so it is ongoing.
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!
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upcoming newsletters.
Please send your comments, questions, articles, and
ideas for upcoming issues to us at:
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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
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