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We recently updated our Mobile Home Park Investment
Study Course. This is a must have for
anyone who is thinking of investing in mobile home parks,
or currently owns mobile home parks and wants them to operate more
profitably.
When you order the Home Study Course you get
the following:
- 24 CD's and a PDF Download of the Transcripts
- The 540 Page Mobile Home Park Investment Manual
- All of our Forms and Contracts to Buy and Operate Mobile Home Parks
- 24 More CD's with Frank and Dave Covering Mobile Home Park Investment Topics
- The 200 Page Mobile Home Park Due Diligence Manual
- One Free Quick Deal Evaluation
- Free Access to our Weekly Mentoring Hour
To view more information about the home study
course
Click Here.
Environmental Due Diligence: Frequently Asked Questions: Part
2
You have a Phase I ESA report and it indicates possible
contamination. What's next?
It depends on the situation. Is the intended use of the subject
property residential or commercial where "sensitive receptors"
may be present (e.g., children, elderly or infirm) or commercial
or industrial? Are you the buyer or seller? There are
differences in clean-up regulations and site "closure" standards
for different types and uses of sites. For instance, the
standards for a pre-school playground are more stringent than a
paved-over industrial site. Working with a qualified and
experienced consultant can answer these questions and help solve
the problems for you.
Another answer to "What's next?" depends on the type and degree
of the environmental impact on the property, the value and
amount of equity one has in it and the intended use for the
property by the targeted buyer. In most states, the buyer and
seller can come to an agreement and the buyer can purchase an
"impacted" property. In other states, the property transfer is
"locked" until the clean-up is complete.
Also, the findings in an assessment report will provide
information allowing lending institutions to continue the loan
approval process, require additional information or even, in
rare cases, pass on the loan.
What are my options if I get a Phase I ESA that indicates that
there are "environmental conditions"?
It is important to understand that, depending on historical and
current local land use, environmental site assessments typically
are not "deal killers". If assessment findings indicate
regulatory deficiencies or environmental conditions, often some
type of routine or straightforward corrective action is all that
is necessary. The discussion below addresses more serious
findings of environmental conditions.
If you are a potential buyer, there are several options if you
receive a "negative" assessment, including:
• Walk away. This option is open to anyone who has not entered
into an unconditional contractual obligation to buy. To keep
this option open, you must make any offer conditional upon
receipt of an ESA report with no adverse findings.
• Have a Phase II ESA performed. This option offers the buyer
much more leverage. Once can confidently make an offer factoring
in the cost of site remediation.
• Buy the property. If you are satisfied with the ESA report
provided by the seller and convinced that the property is worth
the asking price (including the environmental issues reported),
you can go with this option. Extreme caution should be exercised
in this case. Consultation with environmental professionals is
strongly advised before any action is taken.
If you are a potential seller, you must deal with a negative
assessment with several options, including:
• Do nothing. Although Federal and state laws require you to
disclose known environmental problems with your site to
prospective buyers, you may decide not to offer the property for
sale in its present condition. However, you may be contacted by
a buyer willing to purchase the site "as is". Do not proceed
without the advice of counsel, as you may be legally required to
take further action. The other side of the "do nothing" option
simply is to do nothing at all. This may inevitably lead to
escalating costs and serious future problems. This option is the
primary reason for the existence of "brownfields"; defined by
the U.S. EPA as "abandoned, idled or under-used industrial and
commercial facilities where expansion or redevelopment is
complicated by real or perceived environmental contamination."
• Have a full Phase II ESA performed. Depending on the extent of
the indicated liability, it may be prudent to go forward with a
full Phase II investigation. With the results of the Phase II in
hand, you can make a more confident estimate of the net value of
the property.
• Have both a full Phase II ESA and Phase III Investigation and
Remediation performed. Depending on the value of the property in
contaminated condition versus its remediated value, this option
may make sound business sense.
• In some states, there are options to avoid liability exposure
for contamination which are generally based on the Phase I/II
approach outlined herein.
Mr. VerSluis is a 20-year veteran of the
environmental industry, and is a Registered Environmental
Property Assessor (REPA), a Certified Environmental Strategist (eS),
an NSF Certified On-Site Wastewater System Inspector, a NEHA
Certified On-Site Wastewater System Installer, and is the Vice
President of the Michigan On-Site Wastewater Recyclers
Association. Mr. VerSluis is a frequent speaker and advisor on
behalf of MHPS.com & RVPS.com clients, specializing in MH & RV
communities nationwide.
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Determining the Value of a MHP with Park-owned Homes
Purchasing or refinancing a mobile home park with park-owned homes can be a
confusing process when attempting to determine the value a lender will consider.
The real estate portion of the park can be fairly straight forward, but the
mobile homes owned by the park can vary as to how to determine their value.
When analyzing the real estate portion of park, the income and sales comparison
approaches are the most significant. The cost approach, many times is not
included in the report and not a relevant factor in most transactions. The
income approach is determined by calculating the income generated from the pad
rents based on current occupancy and subtracting the operating expenses to come
up with the net operating income (NOI). The NOI is divided by the market
capitalization (CAP) rate to calculate the value based on income. This is a
fairly quick analysis and assumptions to the CAP rate can be made to see if the
estimated value is in line. We usually use an 8.50% - 10.00% CAP rate in most
markets at this time. The sales comparison approach requires information on
mobile home parks sold in the same geographic area within the most recent 3
years at the most. Several adjustments can be made by the appraiser when
comparing parks to one another to include condition of the property, occupancy,
lot sizes, specific market location, etc. The appraiser is ultimately coming up
with a value per pad site and multiplying that figure by the number of pads in
the park.
When a client presents their rent roll and operating statements on a park, we
can rough out the numbers to see if the income approach to value is reasonable
for the proposed loan amount on a refinance and purchase price on an
acquisition. This is a great place to start when considering financing a park so
as not to head down a path that does not make sense based on the borrower's
expectations. This allows us to see where we stand as far as the real estate
value.
The variable that can be quite confusing is coming up with a value for the
park-owned homes. As many deals have mobile homes as part of the value, this can
be a significant portion of the transaction. The age, size, make, model, and
condition of the units are all considered. Their value is based on a depreciated
basis and may be provided by the appraiser or NADA values can be used. We
typically have the owner of the property complete a mobile home worksheet that
provides the above information on the units as well as their rental income or
note income and sales price to the tenant if not a rental. Older homes (built
prior to 1980) are considered a negative factor and the newer the homes and the
better condition they are in will significantly improve the value.
The underwriting of the transaction takes into account the value determined on
the real estate and the value of the mobile homes as well as evaluating the
total net income from both the pads and the units. The debt-service-coverage-ratio(DSCR)
is calculated by dividing the net income by the proposed annual principal and
interest for the mortgage. We are typically looking for DSCR's equal to or
greater than 1.30 when using the park-owned homes in the equation. The mistake
many buyers and sellers make is attempting to value a park using the income
approach on both the pads and the park-owned mobile homes. This can inflate the
value of the units beyond their actual market value.
When financing these types of parks, we typically provide one loan
collateralized by both the real estate and the mobile homes. The amortization is
usually 20 years and the term up to 5 years. Interest rates currently range from
6.50% - 7.50%. In other instances, we are able to provide a loan on the real
estate and a separate line on the mobile homes. This structure is more often
used when the borrower intends to acquire additional mobile homes for the park
and would like the loan on the mobile homes to be in the form of a line of
credit.
Evaluating park financials is different for every property as owners operate in
a variety of ways. Understanding where the lender is coming from is extremely
important when negotiating purchase prices or expectations for a refinance of
existing debt. We can use the above approach on parks nationwide with loan
amounts from $400,000 to $2,000,000.
Steve Murden
Star Capital Corp.
(540) 342-6520
stevemortgage@aol.com
www.starcapitalcorporation.com
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How Mobile Home Insurance Works
The best way to make sure that your mobile home is protected from the perils of
Mother Nature and the weirdest of circumstances is by purchasing mobile home
insurance. Mobile home insurance acts a little similar to homeowners insurance
in the sense that it protects the structure of the mobile home, but its coverage
overall is very different. Although the policy covers a brood range of natural
phenomenon and protects the nature of needs of mobile home owners, it can be
more expensive to purchase compared to homeowners insurance, since mobile homes
are more at risk of damage for its simple construction.
What's In A Mobile Home Insurance Plan?
With mobile home insurance, there are two policy types: peril policy, which
covers your mobile home when there's a fire, tornado, and other natural
disasters or strange happenings, and comprehensive policy, which covers risks
that are not normally listed and excluded by the peril policy. Usually, mobile
home owners can buy the following mobile home insurance packages:
• Personal property
• Personal liability
• Fire and extended coverage
• Additional living expenses
• Emergency removal expenses
• Consent to move
• Transportation coverage
• Lien holder's single interest coverage
Note: Some packages are optional to purchase.
What To Do To Get Mobile Home Insurance
To find a mobile home insurance policy that's right for you, you should ask your
family and friends for recommendations or shop online for a free mobile home
insurance quote from an insurance rate generation website or a private insurer
you may know of. However, beware; the insurer will ask you some questions about
yourself and your mobile home, regarding its age, the amount of finances you
have, and if your home meets tie down requirements.
Your mobile home may shelter you from the outside elements now, but the chance
of loss will always exist. Shop around for the right mobile home insurance
policy that fits your needs. And remember; the more options you have, the more
likely you will walk away with awesome coverage and an affordable monthly
premium.
Staff contribution: Brandon Clayton
About InsuranceAgents.com
InsuranceAgents.com provides consumers with access to insurance information
including articles, quotes, and comparisons.
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What's The Media's Attraction To Mobile Home Parks?
Only about 1% of Americans live in mobile homes. So why are there so many
negative articles out there? And why are apartments not held to the same
standards, in regards to media exposure?
A recent search of Google News for "mobile home parks" yielded the first two
headlines "SWAT Standoff in Houston Mobile Home Park Ends Peacefully" and "Man
in Stable Condition After Gibsonton Mobile Home Park Shooting". O.K., I'll admit
that a lot of bad things happen in trailer parks. But how come I can do the same
search under "Apartments" and I see nothing but headlines about fire damage and
sales prices? I drive by a ton of apartment complexes that I just know have
daily shootings, stabbings and drug busts - but no media coverage. And apartment
dwellers are a huge part of the housing stock in the U.S. so the occurrence of
these items should dwarf trailer parks. Why it that? Well, I have a theory:
media companies love to exploit the public's stereotype of trailer parks. Here's
why I think they do it:
• Trailer park people do some incredibly stupid things. The public is fascinated
by the lore of "trailer trash" and the dumb things they do. There is also a
fetish among Americans today for "stupidest home videos" and "jackass-style
antics". There is even a section of msn.com for "stupid and weird" news. And I'm
the first to admit that only a trailer park resident can dream up trying to go
to Mars by attaching weather balloons to an arm chair or keeping a prisoner in a
cave under their trailer. So the media is just giving the public what they want
- pure idiocy. And trailer parks do a great job of supplying that.
• Trailer park people have no lobby groups or activists supporting them. If you
make an offensive comment about virtually any other group, whether it's Eskimos
or Cuban's, some action group will take that media outlet to task for putting
down that type of person. But not trailer trash. You can blast them 24/7 and not
one person will put up a fight. Jeff Foxworthy has virtually built his career
around bashing trailer trash. I have a copy of one of his book's on my
bookshelf: "There's No Place Like A Mobile Home For The Holidays". To my
knowledge, no action group has ever filed suit to block it.
• Apartment complexes are big advertisers. You would not put down your bread and
butter advertiser group, would you? While trailer parks may occasionally run a
piddly classified ad, apartment complex owners buy page after page of display
advertising. Not writing or airing anti-apartment stories is just good business.
• Very few readers, listeners and viewers live in trailer parks. It would be bad
business to put down or make fun of your own audience. But very few people live
in trailer parks, so they are fair game. It's not like running a negative
trailer park story is going to cause a big decline in circulation, or ruin
ratings.
People ask me all the time if trailer parks are as bad as they read or hear. The
truth is that they are probably a whole lot better than apartments, but they get
unfair treatment by the media. If the media used the same reporting standards on
apartments as they do on trailer parks, the public perception would be a whole
lot different. And we'd get a lot more stereotypes of "apartment trash" and less
of "trailer trash".
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