May 2009

This issue of the MobileHomeParkStore.com and MHBay.com Newsletter includes: 

1. The New Mobile Home Park Home Study Course
2. Article: Environmental Due Diligence FAQ Part 2, by David VerSluis
3. Determining the Value of a MHP with Park-owned Homes, by Steve Murden of Star Capital
4. How Mobile Home Insurance Works, by InsuranceAgents.com
5. Article: What's The Media's Attraction To Mobile Home Parks?, by Frank Rolfe
6. Tell us what you think and send us your articles!

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.

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

How Mobile Home Insurance Works

The best way to make sure that your mobile home is protected from the perils of Mother Natureand 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. http://www.InsuranceAgents.com/

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".

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

Tell us what you think!

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