Q. There doesn't seem to be a lot on the
market. Where are the deals?
A. We've got over 1,000 listings on
Mobilehomeparkstore.com, and there are several
hundred more on Loopnet.com. That does not even
count the brokers listings that pop up several
pages more of listings if you click on them.
That's quite a bit already on the market. On top
of that, you should hit park owners with direct
mail, phone calls, and brokers with the same.
It's not hard to find an enormous stack of
mobile home park deals fairly quickly.
Q. Sellers seem to be unrealistic in
pricing, asking 7% cap rates. What's up?
A. Same difference as the asking and selling
prices of homes right now. Many sellers refuse
to accept the reality of the marketplace. They
think that, since someone offered them $1
million for the park three years ago, it must be
worth $1 million or more, even though the income
barely supports $500,000. If they own it free
and clear, and don't mind sitting on it for 20
yeas, then they can just wait out the market.
The others don't have that luxury. In the end,
anyone who seriously wants to sell is going to
have to price it at a 10% cap or higher. The
ones who are adamant that they want 7% are often
impossible to reason with, but many of them are,
at this point, ready to look at reasonable
offers.
Q. Did Warren Buffett sell Clayton?
A. Not that we are aware of. A search to
Google News just now showed no such report.
Q. Can you expand on the New Home
Solutions program?
A. We try to match up park owners and
manufacturers to see if new homes are attractive
based on their new, low prices vs. higher repo
prices and costs to renovate. Obviously, if you
can buy a new home or a used home for the same
price, you're going to buy new. In some markets,
that's already the case. It depends on the type
of home you are trying buy (singlewide vs.
doublewide, metal s. vinyl, 14' wide vs. 16'
wide) and where you are located at. But isn't it
worth a quote if you are looking at buying some
homes to put into your park?
Q. Why would the owner of a land-only
park want to sell and carry paper?
A. If I sell a park for cash, I have to pay
tax on it and then put what's left in a CD
paying 2%. If I carry the paper, I pay the tax
out over time, and earn 8% interest in the note
- that's more than four times more to me each
month by carrying the debt. Many older sellers
don't need the cash, they need the income.
Seller carry improves their income.
Q. How do you value a decommissioned
park? Have you purchased any?
A. You have to value it based on current
income - but, of course, that's zero. So the
value is not going to be real high. You could
only buy such a park if you planned to bring in
the homes yourself and sell them off. But when
you add in the cost of bringing in enough homes
to stabilize it to 80% occupancy, as well as all
the necessary capital improvements to the
infrastructure required of an abandoned park,
the numbers are probably just not going to work.
The only exception would be an incredibly
desirable location with a very high lot rent
($400+) where the infrastructure is perfect -
but even then, you have to bring in the homes,
so it would be a hard gamble.
Q. How do you come up with a cap rate
when the park is only 40% occupied?
A. You have to go by the current income at a
10% cap or better. You can't put any value on
the vacant spaces. That's not what the owner
wants to hear, but that's reality.
Q. If the location does not have a
City Hall, where do you go to check the permit?
A. Good question. You have to go to whoever
has authority over that property. Normally, head
to the county offices and ask them. Also
remember that with private water and sewer,
there are other groups involved, including the
State.
Q. I am currently billing back water
and sewer using a RUBS method (people per
household). Should I add sub meters?
A. The RUBS method has its problems. The
tenant is not paying for their own usage, but
the park average, which is not totally fair. It
certainly does not foster conservation as there
is no direct accountability. On the plus side,
you don't have to read any meters and create
bills from them. It also does not require the
cost of installing meters and maintaining them.
Is RUBS legal where you are? If not, you
better change system quickly. If it is legal,
then why change to individual meters? Your net
effect (-0- water/sewer paid by the park) does
not change. So how much is it worth to you to
foster conservation and be more "fair"?