If you're trying to break into the MHP business with $100,000 in cash, more or less, you've got some tough choices ahead of you. While anything is possible, $100K generally isn't enough to buy a park and extract the upside (assuming it's an upside-deal). A $500K park (cheap by MHP standards) can easily require a $200,000 cash down payment (40%), then if it needs any improvements, fixing or adding park-owned homes (POHs), or any infrastructure repairs, you'll be at $300-400K cash before you know it. So, in this case, $100K would not be nearly enough.
Some new MHP investors try to get around this by buying tiny parks for tiny prices. Rule #1: don't buy a MHP with less than 30 spaces. Tiny parks often don't produce enough income to pay their own expenses, yet they're just as much trouble to run as a bigger, profitable park. Also, when you go to sell it someday, you'll discover that seasoned MHP investors don't even look at parks with less than 30 spaces. Don't buy a too-small park. Another way that some investors try is the 'zero-down' owner-finance or lease-option deal. Sounds good at first. But in the hottest MHP market in history, why would an owner do that? Why would they have to? And why hasn't someone snapped it up yet? They offer special financing like this because they're extremely motivated (ie: desperate), usually because the park is 'eating money'. Be careful, you don't want to be the next guy stuck feeding the park and begging someone to take it off your hands. Another way still is to bring in partners, which could be a blessing or a curse. Most start out as friends or family. Many a partnership has ended in failure, and often with hurt feelings that may never heal. Beware.
BUYING MORE WITH LESS
Syndications have been around for centuries. Essentially its a way where like-minded investors can pool their resources to buy more, bigger and better stuff, and make more money. The difference is that it's all business, no personal feelings to get hurt, and professionals are running it for you. As it applies to Mobile Home Parks (MHPs), many investors today are trying to break into the market who don't quite have enough cash to get into a decent MHP, and team up with other investors in the same boat to buy better parks. Does it work? Like anything in the world, there are successes and there are failures, and everything in between. However, we are working with the talented people at Mobile Home Park Investments, who form up these investor syndications, and we do the management of the MHPs they invest in. It's a perfect partnership (no formal connection between companies), their financial expertise and our MHP management skills.
MOBILE HOME PARK INVESTORS
So, does it work? Jerry Binkley, the president of MHP Investors, has put together seven such MHP deals with us alone (and many other deals over the years in other RE segments), some of which we're in the middle of now. Jerry prefers upside deals and with the resources that we bring to the table, it's worked out quite well for Jerry and his investors.
EXAMPLE: ROLLING MEADOWS ESTATES
Each group that Jerry forms to buy a MHP is different. One of his investor syndications bought the Rolling Meadows Estates MHP in Mt. Vernon IL in Feb 2017 for $750,000. It's a 102-space park with 68 tenant-owned homes (TOHs), 4 park-owned homes (POHs) and 30 vacant spaces to which we added 30 POHs This was a 2-year project that generated a 20.19% return on their investment to the partners.
EXAMPLE: MESA ROYALE MHP
Mesa Royale MHP is in Mesa AZ. It was purchased by one of Jerry Binkley's syndications in August 2015 for $1,100,000. Improvements were made and 31 months later, it sold for $2,375,000, generating a 19.2% annual rate of return to its investors. And they never had to raise a finger to help.
We're forming our next group now
Most Asset Managers like Jerry Binkley restrict their activities to those investors with $500,000 or more to invest. It's rare to find a real pro who is willing to work with investors with only $100K or so. We're forming up the next group of investors now with a goal of putting together a fund of at least $1 Million in cash with which to buy a killer park with great upside, and enough money to do it. We're on the hunt for the next park as we speak. It will be a good one, because having $1M in cash allows you to be picky. When you've only got $100K or so, you can't afford to be picky, you take whatever you can find. By teaming up with other investors like yourself, and pooling your resources, you can now own a piece of a mainstream MHP instead of a tiny starter park. Ancient proverb: "Sometimes its better to own 10% of a home run than 100% of a turkey."
CHECK OUT THIS 29-MINUTE VIDEO FOR THE WHOLE STORY:
VIDEO EXPLAINING THE PROGRAM
I know 29 minutes is a long time, but this is pretty important. It's your money and you should make sure you're getting the whole story. That's why we made it so long. We hope to have a shorter version very soon, but for now, enjoy the video. Call me any time with questions, or to be added to the list.
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