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MHP Investor Newsletter #4
October 29, 2013
It's been a while since the last edition of ”THE MHP INVESTOR”. Lots has been happening, as the market, and the economy drag on. However, through it all, Mobile Home Parks have proven, and are proving to be rock-solid investments through thick-and-thin, grinding out Positive Cash Flow month-after-month, even while most other types of investments floundered.
Things have also been busy for me, personally. I sold one of my California Mobile Home Parks, and purchased a sweet little turn-around deal in Georgia. I'll go into more detail later in this issue (see below). We've also just opened up a new division at CCI Real Estate called RLM Properties, which specializes in Nationwide Mobile Home Park Consulting. Forming a new company has a way of keeping you busy.
On top of it all, we've also got a big event coming up this weekend. The REI Real Estate Investor Expo comes to the Hilton Anaheim this Saturday & Sunday, November 2 & 3, 2013. As part of the kickoff for RLM Properties, we will have a booth at the Expo both days, and we'll be doing a one-hour talk on the subject of...you guessed it, Mobile Home Parks.
As I said...busy, busy. But it's all good. I'm having a great time and business is good. Enjoy this fourth edition of THE MOBILE HOME PARK INVESTOR, and if you have any questions, or would like to know more about how you can get in on some of this action, by all means call or email me with any questions, or any interest you may have in any of these properties.
or email me.
IN THIS ISSUE:
MARKET TRENDS - What’s going on, out there?
FREE MHP CONSULTING - Just email us with your questions.
FREE DUE DILIGENCE CHECKLIST - Yours free for Subscribing.
WE SPEAK AT THE REI EXPO - And you’re invited!
MY NEW MHP IN GEORGIA - What I'm doing, and how I'm doing it.
As this dismal economy continues to drag itself along, Mobile Home Parks have continually proven themselves to be stable, resilient & profitable, right through the worst of it. MHP Tenants who own their own Mobile Homes in a park aren't likely to go anywhere, since moving the home is very expensive, and where would they take it even if they did? MHP Tenants who live in Park-Owned Homes are generally getting a better value on housing than they could in an apartment or house. So in both cases, Mobile Home Parks have remained relatively full, when compared to the crushing vacancies that certain areas of residential, commercial & retail have suffered. Commensurately, Mobile Home Parks have also held onto more of their market value than most other types of investments.
The interesting thing is that there are very few truly good Mobile Home Parks on the market, right now. If you check the internet, eliminating the old stuff, those that are too big or too small, in the wrong area, that make enough money, and who have reliable numbers, there's almost nothing left! I know, I check almost every day. I have clients who want me to find them something, so I'm constantly looking. Even the ones that look good on the surface are often showing inflated numbers, so called "pro forma", which means "what if" in many cases. (Not that pro forma is bad, we do lots of pro forma deals. But don't represent the numbers as "actual", when they're really pro forma numbers.)
On the financing front, the banks are finally making & funding some meaningful loans on Mobile Home Parks. I've closed several recently. But, the commercial loan market has changed some since the Crash of '08. Now, you can expect to put about 40% down, the loan will be at around 5.75 to 6.25%, amortized over 15 or 20 years (or less, my Georgia park is amortized over 10 years. Ouch!), and get this...due in 3 years. Now, here's the deal with that, friends: The lenders don't want to get paid off in 3 years, hey they just loaned it to you, they don't want it back. They just found a new way to protect themselves, while fattening their wallets, at your expense, of course. Every 3 years, you need to re-qualify for the loan, which protects them from problems that befell you after they made you the last loan, like a divorce, a DUI or a BK, for example. And of course, they're going to adjust the interest rate to market, whatever that is at the time. And, let's not forget that point they get to charge you every 3 years. They're not great loans, but they're the only game in town, if you need bank financing. That's why most of the deals we do are still Seller Financed. Simple, clean, cheap, and usually interest-only payments for 5 to 7 years, sometimes even 10 years.
If you want to increase your Positive Cash Flow, if you'd like to see what one good Mobile Home Park could do for your bottom line, call me. I love talking about Mobile Home Parks. We've got some killer deals we're putting together right now, that aren't on the market yet. Some are very low-priced (I'm talking low $200K's), some require very little down (I've got a creative deal coming up that will require less than $100K down), right on up to $8 Million parks, and everything in between.
Call me, Andy Tallone at (925) 323-2134 or email me with your questions about the Market, MHP Investing, or any other real estate questions.
FREE MHP CONSULTING
As part of your FREE SUBSCRIPTION PACKAGE, you are entitled to a year of free online MHP consulting, provided to you by experts in the field of Mobile Home Parks. Our able staff are involved in every aspect of MHP Investment and Operations. We have experts on:
MHP Purchases & Sales
MHP Due Diligence investigation
MHP Financing & Refinancing
MHP Operations, Management & Maintenance
MHP Development & Expansion
MHP Turn-Around & Value Enhancement
MHP Tenant Relations
California Commercial Investors (CCI for short) has a Sales & Marketing Division, a Financial arm, a Property Management Department, and a Consulting Company. We work with MHP Buyers, Sellers, Owners & Investors all over the US. We do paid Consulting and flat-fee Property Management on dozens of MHPs across the country.
So, we’re imminently well-qualified. We are offering our consulting services FREE OF CHARGE to you for the next year, on any subject relating to MHPs via email-only . So, email me your Mobile Home Park questions to us. (Of course, as always we are just giving one possible viewpoint and while the information is deemed reliable, it is not guaranteed.)
Just this week, one of our subscribers to this e-zine called for some free advice about MHP Manager contracts. Keep 'em coming.
DUE DILIGENCE CHECKLIST
Another part of your FREE SUBSCRIPTION PACKAGE is our Due Diligence Checklist. This is the one that we use when inspecting Mobile Home Parks that we’re considering for purchase. Thorough Due Diligence is absolutely essential in MHP Investing, but its your responsibility to (as they say in the fight game) “protect yourself at all times”. Sellers are obliged by law to give you whatever information you request, but do you know what to ask for? Hence the Due Diligence Checklist. If you haven’t already, then please get a copy of it here. Look it over and study it. If you’re thinking of buying a MHP, you need to know this stuff. Come to think of it, if you already own a MHP you need to know this stuff. And if you’re thinking of selling your MHP, you will need to be prepared to provide all this stuff to a potential Buyer.
If you have any questions on the Due Diligence Checklist, or on conducting your own Due Diligence Investigation, please don’t hesitate to call me, A.C. Tallone (925) 323-2134 or email me.
WE'RE GUEST SPEAKERS AT THE REI EXPO
SATURDAY & SUNDAY, NOVEMBER 2 & 3
IN ANAHEIM CA
The California Commercial Investors group puts on several events throughout the year to reach out to Mobile Home Park Owners, Buyers or Potential Buyers, and Sellers. This time we're doing things a little differently. To begin with, we've just opened a new division of our company (a new company all its own, actually) called RLM Properties, and we're doing this event under our new company. The focus will be on what we do at RLM Properties, consult MHP owners, buyers & sellers on how to make more money with Mobile Home Parks. That's what we do. The other thing that is new about this event is that we will actually be guest speakers at this Real Estate Investor Expo, and will be the first ever to speak on the subject of Mobile Home Parks. We're honored and very excited.
The REI Real Estate Investor Expo is being billed as "The Largest Real Estate Investor Tradeshow" and is being held at the posh Hilton Anaheim, right across the street from Disneyland, at 777 West Convention Way in Anaheim. The show runs 7:30am to 6:30pm on Saturday & 7:30am to 5:00pm on Sunday, with speakers, classes & seminars going almost non-stop all weekend long. The cost for both days is $149. Sign up at REI's website. We'll be speaking from 1:00pm to 2:15pm on Sunday. And we'll have a booth set up at the Expo all weekend long. So if you're there, please stop by & introduce yourself. I'd love to meet you and talk about Mobile Home Parks.
The point of all this is to introduce real estate investors to the financial power of mobile home parks. There truly is no better investment on the market today than Mobile Home Parks. High returns, great cash flow, easy to run, low cost of entry (relatively speaking), and excellent upside. And on the subject of upside, they're also easier than just about any other type of investment to increase their value, so that you can resell them at a profit. Again, it's what we do for our clients, again and again and again. If you would like to be one of these clients who gets a complete accounting each month along with a big fat check, call me, Andy Tallone at (925) 323-2134, or email me.
MY NEW MHP IN GEORGIA
GO SOUTH, YOUNG MAN!
I sold one of my California Mobile Home Parks just about a year ago, Shiloh River Resort, a gorgeous little 13-space park on the banks of the Tuolumne River near Modesto CA. I got $575,000 for it, and the lady who bought it is enjoying a 10% return on investment & is loving it. It's a very nice park, and quite easy to run. She'll do well there, just as I always have.
But now it's onwards and upwards. I reinvested the money in a 70-space MHP in Hazlehurst, Georgia, a tiny little Southern town with just one other Mobile Home Park for many miles. 47 of the spaces have Tenant-Owned homes paying...get this...$75 a month space rent! 75 bucks! I couldn't believe it!! It needs to be about $125, maybe $150, but that will come soon enough. Then there are 18 park-owned homes there, of which a few were rented (about $300/mo), but most were in need of repair. I picked it up for $440,000 with $150K down & the seller carrying back the balance at 6% interest-only. But he was only willing to carry it short-term, just long enough for me to get it running right and refinancing, which I'm doing now.
This is a classic turn-around deal. When I got it, lots of people weren't paying. Most of the park-owned units were unrentable. And it was being managed poorly. In the 11 months since I bought it, we've had to get tough with some tenants, evicted some, even pulled a couple of trailers out of the park to show the tenants that we mean business. Sometimes you've got to do things like that to prove a point. And it worked, because now the payments are rolling in nicely. We also fixed all but 4 of the park-owned homes, and they have been renting up quickly. We also brought a husband & wife management team in who worked for on on a MHP in California that we knew were honest & capable. And they were ready for a change in scenery, so it all worked out great.
I've since put about another $35K into the park, fixing Mobile Homes mostly. So, I'm in it about $475K total. And Hazlehurst Mobile Estates has just turned the corner, as projects go. Starting next month or so, the Net Operating Income (NOI) should be somewhere around $5,700 per month, and that's before raising the rents. That's about $68K/year which is about a 14.3% Cap Rate (at $475K). Nothing to sneeze at. But check this out: raising the rents just $25 increased the NOI by $1,750/mo! Holy cow!! And the rents are about $50 too low. So, I'll be doing one rent increase after the first of the year, and the next about 9 months after that. So after the first rent increase, my NOI will climb to about $7,500/mo, $89K/year for an 18.7% Cap Rate. One more Rent Increase takes me to around $9,250/mo, $111K annually for a 23.3% Cap Rate. Now that's what I call stellar returns.
I'm doing this one for myself, but we do the same thing for our clients. If you're interested in knowing what's possible for you out there, please call me, Andy Tallone at (925) 323-2134 or email me. SEE YOU SOON...
Hope you enjoyed this edition of THE MOBILE HOME PARK INVESTOR. I'll try not to take so long for the next one. Times are-a-changin', and you've got to stay one step ahead, or hopefully several steps. The stock market is all over the board. Housing hasn't staged the comeback that everyone was hoping for, and unless the jobs come back, there won't be anything to drive it. And commercial & retail are flat as well. Mobile Home Parks represent the best, safest and most profitable way to invest your money today. And they're more or less recession-proof. Don't wait for the next downturn in the market to wipe your other investments out. Move your money into Mobile Home Parks today. Call Andy Tallone at (925) 323-2134 or email me.
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