Mobile Home Park Owner News
Published by: Jim Carmichael, September 1, 2004
PRIVATE WATER AND SEWER ?????
Last issue I asked for topics that you would like for me to discuss. One topic came up several times, so I will address it here.
Why won’t you do a deal with a MHP that has private water or sewer? And why should an investor be concerned?
Many of you have had an experience with this. Some with no problems to speak of and some with more problems than you wished you had.
The reason I don’t do these deals is for a couple of reasons. Primarily there is a limited market of investors willing to buy them. And the other is that I was warned to stay away from them by someone in Frankfort, KY (Capitol).
Why do investors stay away from these communities? Our asset is cash flow and risk avoidance. We rent dirt. How hard is that suppose to be? When you own a MHP with it’s own private water or sewer plant you open the doors to potential problems. With the water you must establish and maintain a water company. This means testing and inspections. Therefore added expense. With private sewer you have all the testing, more inspections and a lot more maintenance.
Any time you open yourself up to the government to inspect your property, they will eventually find a problem. And for those of us in Kentucky, we have enough problems with health department inspectors. Not to mention that there is an active movement by the state to get rid of the private systems. Particularly the smaller mom and pop parks.
The bottom line is this, as an investor, you want to minimize your risk of exposure. Private water and sewer systems only open the door for potential problems.
HAVE YOU CONSIDERED YOUR 1031 EXCHANGE???
Have you noticed the CAP rates on exchange properties? If you are selling or are about to sell you MHP (or any other property) you need to think about this. For most MHP sellers the next logical step is to purchase a single tenant NNN property. What you are going to do with the proceeds of the sale of your park needs to be part of the conversation with your agent when you list the property for sale. You need to start looking at deals and what you think you want to buy next. The NNN deals sell very fast, so you can watch trends until you get to closing, then the process begins.
For your 1031 exchange to be success you must watch the trends, the interest rates and what kind of financing is available. A good professional agent/ broker will be able to help you through this.
David Dulworth on the sale of his 315 pad MHP in Louisville, KY
Jim Carmichael for brokering this deal.
GONE HIGH TECH
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Our goal is to help our clients find the best property in the best location that will maximize their return.
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Jim Carmichael has been in the manufactured housing industry for over 11 years. He has spent time in retail sales with Oakwood and Clayton and later managed a sales center for Clayton in North Carolina.
Jim has a unique perspective of community ownership. He knows where the homes come from and who lives in a MHP. He has devoted the last several years to learning the operation of communities and what investors look for.
Proficient at the 1031 process, Jim will help you after the sale as well.