Author: R Ewens (---.dhcp.atsc.ca.charter.com)
Date: 01-05-10 12:13
Is anyone out there in MHU land looking at community purchases this year?
It seems really quiet considering the current buyers market we are experiencing. I would love to talk about some deals. I cant find the community I want, but I would love to hear of someone elses success. Come on tell me about some deals.
Rick Ewens
Author: Howard H (CA) (---.shutterfly.com)
Date: 01-11-10 13:47
Hey Rick,
I'm surprised there aren't more replies on this topic. I am most definitely in the market for another park (or two or three). The market will continue to be ripe for buyers.
With that said, dealing with banks and financing has been an absolute nightmare. In talking with several brokers there have been many quality offers/buyers who just could not get the financing needed to close deals.
The key will be to get private financing to back up the buyer. It sounds like you have a good beat on that aspect already so you will undoubtedly be able to pounce once you find the correct deal.
If we had any funds available, we would continue looking for other MHPs to buy. However, since funds were expended to get 2 properties in 2009, the only channel open for this year is to look at possibly selling one MHP and doing a 1031 exchange into something else. MHP in CO has really improved as to cash flow and when it is going well, you really do not want to put it on the market - yet that was what we did for our NC MHP in 2008.
We did sell at the top of the income stream when in NC. We flew from NC to Steve's meeting in Seattle to meet the "Big boys with cash" from CA. I still remember Rick telling me the MHP in NC would never sell for the price we were asking and that if it did sell, it would never appraise for that value. We did not let the negativism blur our end goal and it sold at our asking price and appraisal was no problem for the bank funding the loan. We knew that we were sitting on a "cash cow" and were able to sell it right.
We did receive some of those "Bottom Fisher" offers, but let them move on to easier prey. It was amazing at the posturing from them trying to downplay the income from the property to justify their low offers. For all of the "Bottom Fishers" good luck in finding those Great deals you are looking for.
Besides doing a 1031 exchange the only other option open would be to find some private financing or to partner up with someone. We had to let a MHP pass as we had no funds available. It was mainly doublewides with only 2 singlewides in a senior MHP in Tacoma, WA. Since we had just purchased 2 MHPs - we could not move on it, but later heard the Seller of one of the MHPs we bought did take it off their hands.
Anyone with private money willing to provide funds to buy MHPS at a reasonable rate - let us know!
Author: R Ewens (---.dhcp.atsc.ca.charter.com)
Date: 01-11-10 19:33
I am really glad for all your success Dale you seem to be knocking them dead with great deals. It would be great if you could show us all how you have so much success. I am sure that my long distance business management model is one reason I havent found a new property. I dont relocate to operate or manage my businesses. I dont live in my communities or even near by. I prefer not to work in the community either if possible. I have found many ok deals on 100 space or less communities that would probably be good enough for the owner that wants to do a lot of work himself. My trophy will be found. Patience, Patience
Successful Investing To All
I wish I was knocking them dead with the great deals! April to December last year was spent in getting loans on the properties. You know this as I had talked to you about the problems and headaches of getting financing on the first one. I wish I had the deep pockets to buy more, but reserve has been depleted. So without funds for a down payment we will probably be sitting on the sidelines watching others get the great deals for the next few years! Hopefully, while we are on the sidelines, your ship will come in!
Financing: Many banks are tightening up on everything. Before 20% down was sufficient and 80% financing for a purchase. Now 35-40% is required for a down payment. Lots of banks have dropped out of commercial financing. Union Bank of Calif requires 40% down with stiff prepayment penalties as well as personal recourse. US Bank will still do loans, but requires 50% down. Wells Fargo will do only 5-star parks with over 50% of the homes being double-wides. Clayton Homes is supposed to have a section that does MHP loans, but we were unable to get ahold of anyone in the know about this source. MHPS.com is supposed to have several companies that do loans, but heard back from one after it was too far into the contract time period to restart negotiations for a loan. Anyone who has other possible sources for financing - feel free to contribute for those looking!
Dale your post regarding the sale of your MHP is a thought provoking one. Would you share with us a bit of your insight and opinion as to the causes for your ability to sell at what sounds like was a substantial premium over what Rick had estimated? Was your property unique in its market? Do you consider the basic rule of thumb valuations touted within this forum to be flawed? Or, did you make a better presentation of your property than is typical?
Author: R Ewens (---.dhcp.atsc.ca.charter.com)
Date: 01-12-10 06:44
I would like to hear about Dales great deals also, but all I hear is how difficult it is to get financing. The details of acquisitions and sales are what we all want. This is an educational forum and I personally would love to learn more about other investor’s successes and or failures so as to avoid them. MOM meeting November 2007 Hmmm I don’t think I was giving out opinions of value back then and especially on properties that I had never seen, but if you say so Dale. Anyone that knows me knows all I want for any investor is success period. It sounds like you had great success in the sale of your NC community and continue to have great success in your new ventures. Congratulations. I wish you would share details. Many of us could use additional mentors on our paths to successful investing. One thing I do remember about 2007 is that most of the country was still in denial about falling real estate values and the crumbling real estate market. The BIG Boys From CA With All The Cash as you state Dale new better, because our real estate market had fallen off a cliff. I sometimes wonder about the people that I sold 13 of my properties too in CA in 2006 at the peak of the market. I call what I did luck. But for those that have had great success because of their wisdom – Please Share
Rick Ewens
NC rental income was 22K with 10K out for expenses with debt service included. 12K left over from rents with 24 homes sold on notes an additional 10K per month was coming in. Bought for 1.3M sold for 2.3M about 4 years later.
As for the rule of thumb valuation - I realize it is a tool to be used by Buyers in negotiating a better price. It is geared toward a 10-12% CAP rate which is great if it can be had. All the MHPs I have seen that sold were selling at a 6-7.5 CAP rate. I do not really concern myself with a CAP rate as it is based on the Seller's current numbers and the numbers will be different fo a new Owner. What I look at is money in vs money out - and will it support itself with some left over for a reserve build up.
After take over I then look at increasing income as well as decreasing the current expenses. I do not consider myself to have any extra wisdom, I just take one day at a time.
CO MHP started at 35K income level and was self supporting at that level. Jan we started billing back water and sewer and rentroll for Jan now has 54K for income. Several homes are in the process of being set up and repaired. Once we get all the repairs completed and homes sold we will put together a one year history of income and expenses and market the property for sale. We have not raised the rents since we took over except for those moving in. Most of the increase was from the 24 homes we inherited from the Management Company that were sitting empty. They now have new owners and lot rent is coming in for those lots.
I think this is the same way others increase their values and then sell their properties. It does not take any stockpile of wisdom to do. Anyone could do the same thing.
Author: R Ewens (---.dhcp.atsc.ca.charter.com)
Date: 01-12-10 11:01
Dale
Thanks for the information. WOW those monthly cash flow increases are fantastic. I have experienced the same in Burlington going from $12k per month to $33+K over a 3 year period and we have a long way to go, because we are still just 50% occupied. We also moved $25K per year to the bottom line by passing the water and sewer bill through to the tenants. I am curious when you buy a property are you concerned about ROI from month #1. Do you seperate the rental home income and expense (rent to own/ lease to own) from the lot rental income and expense? If so what are your average repairs costing on park owned homes when you evict or lose a tenant? When I analyze a deal I look for all the upside I can find but I try to make my ultimate offer based on existing cash flow as though it is not going to change. I also want ROI from day #1. Based on your post our cash flow and value amplification methods are basically the same. Where I think we differ is in our initial valuation of the property. Sounds like your method is working well for you.
Rick Ewens
Of course we are looking for the property to pay for itself from month #1. Only lot rents are looked at: Is there enough to pay all the bills and still have some left over? If so, then we can look a little deeper. Utility billbacks and MH payments are the gravy on top. After takeover if there are any rentals, we convert these to lease to own instead. We did apartments 10 years before getting into MHPs so do not want the renters. If you look at some previous posts, I explained I was a slow learner and it took me 3 years to identify that all the problems were coming from the units that had Section-8 renters in place (Hopefully, we do not open the Section-8 thread again). NC was our first experience with MHPs and we are hooked on them now! By transferring from rentals, we avoid having the repair & maintenance expenses. Most homes we have taken back we have had a waiting list compiled so we sell them "as-is, where-is" and may not even miss a month of lot rent on some. If there are repairs needed, I allow 1-2 months free lot rent for new owner to fix it up and then end up with a better home if I get it back again. One resident in NC built a nice porch with a roof and lots of people liked it so before long we had 12-15 homes with nice porches with roofs and benches around to sit on all built by the one resident. For homes already in the MHP we try not to put too much into the homes. NC had quite a few people who were experienced in doing their own repairs. CO did not have the same luxury so we ended up putting 4500-6000 into some of the vacant homes we inherited from the management company. After awhile, if does not sell at a value to recoup the expenses, we will sell it off for 1-2K just to get it occupied and lot rents coming in. Another issue with the homes in CO - many were older 1-Bed/1-Bath units. We have found that getting someone in and lot rents coming in it works out over the long run. The new people are paying $65 more per month than the old residents.
Author: Dr B.(OH) (---.fuse.net)
Date: 01-12-10 15:36
Dale,
I'm impressed with your numbers. It is also apparent that you put additional $$ into the park in rehabbing the homes. This may be Rick's point. How much of that $19K per month extra from the bill-back goes into rehabbing homes.
Initially, we try to put almost everything back into the MHP for the first 2 years. (Stabilization Period). Year 3 starts the income stream recapture and year 4 is the gravy year. (Income Return or Profit Period). Market the property and step into another project. Sale proceeds are rolled over into another project. (Exit Strategy). March will mark 2 years with CO property and it still has a few more vacant spaces to fill up and several homes from tax sale to be moved in. We were tied up with property acquisition last year so did not concentrate on filling up the MHP as much as we initially planned. With what little funds we have left over, we will look at filling up those empty spaces this year and then start rebuiding cash reserves in 2011 & 2012. With a nice 2-year stabilized history we will then consider selling this property. First MHP we bought in WA had 3 spaces vacant. We have 2 homes bought and one more to go there. Other MHP in WA being a senior MHP on a lake did not have any vacancies. A single family home on a lot by the lake is for sale for about half of what we paid for the 40-unit senior MHP on 4 acres.
Author: R Ewens (---.dhcp.atsc.ca.charter.com)
Date: 01-12-10 17:00
Dale your business model is different than mine. FANTASTIC because it works for you. This should show newer investors that 1 shoe doesnt fit everyone. Business investment models vary like people. I personally want return to me from ownership day#1. The capital needed to get the business stabalized will be available pre purchase in my business model.
Thanks
Author: Jefferson (---.hsd1.ca.comcast.net)
Date: 01-21-10 23:39
My current MHP expansion project in Oklahoma should be complete this summer, and I'll need a new property to keep me busy and off the streets. :)
I am looking to raise money and again be an entrepreneur and turn around another MHP. I may also have a limited amount of cash to invest, but I am primarily looking to connect with a financial partner; I will provide the labor and knowledge and investment leadership.
Author: Dan Freeman (---.dhcp.embarqhsd.net)
Date: 01-23-10 10:12
I recently found a new web site that I'm using to search for parks for sale at www.MobileHomeParkExchange.com -
Investors can save searches and get e-mail updates on the properties they want to follow. The listing inventory is fully searchable AND Sellers list parks for sale at no cost.
Author: Howard H (CA) (---.shutterfly.com)
Date: 01-26-10 12:43
Ok Rick,
So my LOI for a short sale on a park was approved by the seller and lender. We are close to finalizing the contract. I wont jinx the deal just yet and publish details. I am very confident in the deal but the biggest open issue I have is the ability to get financing on this deal. That will be the my biggest hurdle.
More information to come. But if anyone has leads on firms still getting loans done please list them. They are hard to find these days.
Challenges ahead but I am firmly intent this will get done. There are great opportunities out there.
Author: R Ewens (---.dhcp.atsc.ca.charter.com)
Date: 01-26-10 15:39
Fantastic Howard
I hope you got it so cheap that you cant go wrong. You have the experience now so I am sure you made a great deal. Way to go and best of luck to you.
P.S. Financing = I never know from day to day myself about the financing scenario. I am financed with Clayton Bank and Trust out of Knoxville TN.
They gave me all the financial tools to do the job with in my community.
Try the lending connections on all the web sites we frequent and see what happens.
Successful Investing To You
Rick
I closed 3 deals in 2009, very difficult. I, like Rick, was very fortunate to get financed with Clayton Bank and Trust. They are one of the few who understand what we are facing and provide us the resources needed to be successful. I would definently try them first. I also had good success with a Private $ group out of MO. They are an asset based lender, so terms are definently not great long term, but they are great to work with and did perform. If you need a Bridge type loan to close a great deal that you'll be able to get long term financing for after acquistion I would recommend them. If you find yourself in that situation let me know and I'll get your their info.
Quite a bit of this post was used in the Jan 28th edition of the Mobile Home News. My question to this forum - was it sold for monetary gain? I do not mind trying to help others by talking about my experiences, but I did not give anyone permission to print the whole spiel in a newspaper!
Author: R Ewens (---.dhcp.atsc.ca.charter.com)
Date: 01-28-10 10:51
Very Interesting Dale. I have never been on that web site until today. We are famous. I dont know about any profit being made, but if I would have known our posts were going to be circulated I would have checked my punctuation and spelling a little better. Haa Haa
