October 2009

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

1. New Mobile Homes - For Less Than Repo Homes!
2. Article: How To Get Zero Down Financing On A Mobile Home Park, by Frank Rolfe
3. Article: How To Retire On Just One Mobile Home Park, by Frank Rolfe
4. Article: How To Dispose of Ancillary Assets to a Mobile Home Park, by Frank Rolfe
5. New Service for Lenders
6. News stories affecting the Mobile Home Park Industry
7. Tell us what you think and send us your articles!

Our Newest Service - Mobile Homes for Park Owners.

We have spent the last year working on this service.  We have negotiated the absolute lowest prices on homes from reputable manufacturers nationwide.  These are brand new homes for the same price or less than repo homes.  Stop wasting time and money rehabbing older homes.  Update the look of your park with homes residents can afford.

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How To Get Zero Down Financing On A Mobile Home Park

With single-family homes, a legitimate zero down deal is about as likely as sleet in San Diego. However, with mobile home parks, they are as common as rain. of the 25 mobile home parks I've bought, about five of them - or 20% were zero down. So how do you get a zero down mobile home park deal? Just watch the listings Many mobile home parks are listed for sale with seller carry at low amounts down. A 5% or 10% down payment can easily be converted to 0% with a little negotiating. You'll find many such listings on the large internet park listing services, such as Mobilehomeparkstore.com. The most common negotiating strategy is to identify capital improvements that would cost as much as the proposed down payment, and then tell the seller that you need to reserve the down payment money to make those repairs. After closing, you either skip the repairs, or find a lower cost alternative. Wrap the existing note It is often possible to wrap an existing mortgage when buying a mobile home park. What this means is that you do not have to get a new loan, and the seller subordinates his note to the existing first. Here's an example. A seller has a mortgage of $400,000, and he wants to sell his mobile home park for $500,000. Rather than put up a $100,000 down payment and obtain a new loan, you assume the loan of $400,000, and place a second of $100,000 in favor of the seller. You do not put anything down. Why would a seller do this? Often, it's for speed. It takes a long time to get a new mortgage on a mobile home park. Many times a seller, especially someone who does not have a very large profit coming their way, are interested in getting the park into someone else's hands as quickly as possible, and move on to the next deal. Lease/purchase the park This is another fairly common construction on purchasing a mobile home park for zero down. Instead of an outright purchase, you lease the park at a set monthly amount, with the option to buy it at a pre-set price in the future. This allows you to make the necessary changes to increase the net income prior to closing. This construction is especially attractive on parks that are not making sufficient net income to support a mortgage of the amount necessary to buy it. Conclusion Zero down deals are still alive and well in mobile home parks. They don't require that you buy bad properties or deals with no income or some other difficult blemish. They are just a standard construction of the affordable housing industry.

How To Retire On Just One Mobile Home Park

Most mobile home park owners tend to amass a portfolio of several parks, simply because, after acquiring the skill sets, it seems wasteful not to buy "just one more". But, in reality, they only need to buy one mobile home park to be set for life. How can this be? There are several reasons. Sufficient scale. A mobile home park is a mass of different income units. Because of this volume, small improvements in revenue or expenses on just one lot are multiplied by the sheer volume of lots. For example, a small $20 lot rent increase in a 100 space mobile home park yields a cash flow improvement of $2,000 per month. In a single family home, or a duplex or four-plex, by comparison, a $20 rent increase yields under $100 per month in cash flow. Opportunity for massive improvements in income. Many mobile home park sellers are moms and pops with little professional management experience. As a result, there is room for incredible improvement in their operating numbers. Let's just look at three areas that they normally struggle with. The first is the level of lot rent. Many owners that have had the park for a long time are enormously under-market in their lot rent. If the market rent is $300 per month, and they are charging $150 per month, then there is $150 per month upside. Why would they be so low? What normally happens is that they become too friendly with their tenants, and refuse to raise it out of fear of making "enemies". Another common reason is that they simply don't follow the market or do any research on the lot rent level of their competitors. The second is the water and sewer expense line item. Many have a leaking system with many abusers that spike the cost up to ridiculous proportions. These issues can be fixed quickly, and the water and sewer cost shifted over to the residents. Since water and sewer is normally 10% of total revenue in a mobile home park, this benefit is enormous. The third area is management cost. We've seen parks that have a $50,000 per year manager on a 50 space park. How can they be so wasteful? Normally, just like the rent level, they got too friendly with the manager and kept giving them annual raises even when the total compensation was far above the norm. In some cases, the manager is a family member. What's the world record? We've seen $100,000 management packages at parks before. Think you can cut that down? No future obsolescence. The nice thing about mobile home parks is that they are incredibly low-tech. There is no great invention coming down the pike to derail them. If you owned a record store in 1960, and thought you could retire on it, you'd have been mistaken when they brought out the CD, internet and ipod. But there is nothing that can alter the need for affordable housing. And the market just keeps getting larger as America gets poorer. In addition, since you only own the land in a mobile home park, you do not have to worry about saving for building upgrades like replacing roofs or siding. There are few big capital hits you have to save for (or borrow for). Some practical examples. If you bought an average 50 space park for $500,000, with $100,000 down, here's what you could expect to do with it after closing. You might raise the rent $40 per month, for a net gain of $24,000 in cash flow. Then you might submeter the water and bill it back to the tenants, for a savings of another $24,000 per year. And then you might fire the manager and hire a less costly option, for another savings of $10,000 per year. So, in a nutshell, you've increased the cash flow after debt payment by almost $60,000 per year. That's how much you could put in your pocket. And none of these steps required any time, effort or risk on your part. And they did not require any large capital expenditures. So you'd have $60,000 per year in cash flow from the park, while it is still servicing its debt. And after it's paid off, you'd have over $100,000 of cash flow. All from an investment of $100,000 in the form of the down payment. Now do you see what we're talking about? Conclusion. You truly can retire on just one mobile home park. No other form of real estate investment can make that claim (or at least support it). Mobile home parks produce more investment wealth than any other option.

How To Dispose of Ancillary Assets to a Mobile Home Park

Mobile home parks sometimes come with the strangest assets. I have wound up as the owner of everything ranging from used car lots to commercial laundries, and from apartments to single-family homes. How does this happen? Since most mobile home parks are fairly old, the original owner sometimes had additional businesses for rental properties that he owned in his heyday. And when you buy the park, you get the whole works. What is the asset worth? The first question to ask is "what is this asset worth, if separated from the park?" This is often a tricky question, because the proximity to the park can be extremely damaging to values, particularly with single-family homes. Nobody really wants to live next door to a mobile home park. I generally use a rule of 50% of market value for a property not adjacent to a mobile home park. Commercial properties, however, do not seem to suffer from the same stigma. I have normally received a price commensurate with properties that have no geographic location near to a mobile home park. What is the economic impact of selling the asset as opposed to renting it? The answer to this question almost always points to selling the asset. To truly analyze the income from renting, it is important to include all the costs associated with owning the asset, which includes repair & maintenance, property tax, insurance and, of course, operating costs. I once had a used car lot that was using as much in repair and maintenance as the gross rent. Much of that cost was buried in the mobile home park pro-forma, but it was really the used car lot's problem. Can you obtain a partial release from the lender? Even if it is to your advantage to sell the asset, you will not be able to convey title unless the lender is willing to give a partial release of this portion of the property. And the time to ask is now, not once you have begun the process to separate it. In most cases, the lender is often happy to release the portion for the proceeds - it is normally hard to have the lender accept anything less than 100% of the amount you receive. Begin the process of subdividing the property If you have permission from the bank, then it is time to begin the process or separating the asset from the park. This step is generally called "subdividing the property" - making it into two separate pieces. This will require city approval, and you will have to have a survey done of the area to be carved out, as well as go before the planning and zoning commission and often the city council. You may also have to work out such issues as ingress and egress, especially if you will have to share a common entrance and road with the park. List the asset for sale In most cases, utilizing a specialist broker to list and sell your asset is money well spent. Sure, you can put up your own sign - but do you really have the qualifications to negotiate price or speak with buyers such a specialized item in a market you don't know that well. When I went to sell the 8-plex apartment complex that came with a park in Shreveport, I enlisted the aid of a real estate broker that specialized in multi-family in Shreveport. As a result, I found a buyer quickly and at a much higher price than I could have ever obtained. Close on the sale When you get offers, remember that you are selling an asset that is next to a mobile home park. It is not a time to get proud and have visions of grandeur. Take the first reasonable offer and run with it. Since the offers and interest tends to want after the initial listing of the asset on the market, it is important to treat every offer seriously. Conclusion Trimming off and selling all non-mobile home park assets is just good business. If you follow this road map, you should have no problem in maximizing your park's value through converting such assets to cash.

New Service for Lenders:

Mobile home parks are unusual additions to most REO portfolios, and require specialized assistance to operate and maximize their re-sale value.

If you are a lender and have a mobile home park in your REO portfolio, or are faced with foreclosure on a mobile home park, then we offer consulting services specifically for you

Click Here to find out more!

News Stories

City Takes Legal Action Against Park Owners

City Fights to Keep Parks Open?

City Blocking Evictions

Blocking Redevelopment

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