trailer parks

[gregg]

Hi everyone,

I have been investing in multi-unit revenue buildings since April 2007 and been a REIN member for a few months. I have an opportunity to purchase a 45 unit trailer park. Does anyone have any experience in this area. I know the water needs to be tested twice weekly by a certified water tester approved by the Ministry. The park is serviced by six wells. All of the hook-ups are in good shape and the roads have been maintained. They are asking $750,000. with a 15% downpayment they will take back a second. Please let me know your thoughts.

Greg

 

[invst4profit]

Try going to www.creonline.com you will learn everything there is to know about parks and trailers.
You are in for a real eye opener and if you find the right park you will discover a whole new rental world. Good luck.

 

[invst4profit]

Have you made any progress on this park idea.

 

[gregg]

I have visited the park and talked in depth with the seller while she was completing her water safety report for the ministry. There appears to be a lot of potential for additional dollars to be made in the buy and sell trailer side of things. Maitenance of the park seems minimal unless something major happens but mostly the water needs to be tested twice weekly by a certified individual (which she is) and the roads need to be plowed in winter, grass cut in summer and water, gas and hydro lines need to be maintained. All in all it seems like a great investment with more than a 20% return on investment.

Greg

 

[invst4profit]

Sounds good. I am still planning to make an offer this week on my MHP, just need to look
into financing to help in forming offer. I will have close to $1000 in legal into this so I hope
it`s not a bust.

Good luck.

 

[Thomas Beyer]

VERY property management intensive !

pipes freeze between ground and trailer .. and where does the landlord`s pipe end and where doe sthe trailer`s start ? a common issue !

who will manage it ? talk to some managers !

the term "trailer park trash" was invented .. hmmm .. in trailer parks I guess ..

 

[PeterKinchMortgageTeam]

QUOTE (gregg @ Feb 9 2008, 10:06 PM) I have visited the park and talked in depth with the seller while she was completing her water safety report for the ministry. There appears to be a lot of potential for additional dollars to be made in the buy and sell trailer side of things. Maitenance of the park seems minimal unless something major happens but mostly the water needs to be tested twice weekly by a certified individual (which she is) and the roads need to be plowed in winter, grass cut in summer and water, gas and hydro lines need to be maintained. All in all it seems like a great investment with more than a 20% return on investment.

Greg

Financing on trailer parks is tough. Even with a hefty downpayment, you`d probably be looking at a non conforming or private lender. With less than 35% to put down, even those lenders may not consider.

Talk to your broker or banker before making an offer - they should be able to give you a ballpark on rates and fees. Ensure its still a good buy, based on those figures.

 

[gregg]

Hi Peter,

The seller is willing to take back a second with a 15% downpayment so dealing with a broker or other lender isn`t needed. I was considering a JV partner on this project (for the downpayment) but was looking for any information to help me make a decision. The sellers are older and looking to retire. They have another park as well that they are willing to sell along with a 15 unit apartment building, a duplex and a seven unit townhouse development. My wife and I have purchased other porperties from them, all with vendor take backs and our reltationship has been very positive.

Thanks for your input Peter, a lot of REIN members respect your knowledge and I value your opinion. I will let you know how I make out with this project. If you hear anything else about trailer parks I would appreciate your input.

Greg


QUOTE (CanadianMortgageTeam @ Feb 16 2008, 08:07 PM) Financing on trailer parks is tough. Even with a hefty downpayment, you`d probably be looking at a non conforming or private lender. With less than 35% to put down, even those lenders may not consider.

Talk to your broker or banker before making an offer - they should be able to give you a ballpark on rates and fees. Ensure its still a good buy, based on those figures.

 

[Janice]

QUOTE (gregg @ Jan 28 2008, 07:29 PM) Hi everyone,

I have been investing in multi-unit revenue buildings since April 2007 and been a REIN member for a few months. I have an opportunity to purchase a 45 unit trailer park. Does anyone have any experience in this area. I know the water needs to be tested twice weekly by a certified water tester approved by the Ministry. The park is serviced by six wells. All of the hook-ups are in good shape and the roads have been maintained. They are asking $750,000. with a 15% downpayment they will take back a second. Please let me know your thoughts.

Greg

My advice is to do alot of due diligence. We used to camp at a trailer park and knew the owners quite well. They basically said it`s a really tough business, people don`t pay on time, people dont pay at all, destroy property, etc. It`s also the quality and reputation of the park. If it looks the slightest bit dumpy and you think you can fix it up , don`t bother because you`ve probably got a really big mess on your hands. Just be careful I heard too many horror stories.

 

[invst4profit]

Greg have you checked out that web site.
As I mentioned I was looking at a 33 unit park myself. I had a conditional
offer accepted on the weekend and if all goes well I will own it by mid April.
One of the nice things about parks is very often the seller does take back a
morgage. The guy I bought from did that for me and as a result I bought
with no cash down. NOI before debt payment is over $40,000/ year and I expect
to get it over $50,000 within 5 years with rent increases and other tricks of the Park
business. You also have a chance to buy trailers, reno, and sell or rent out as you
please.
With small well maintained parks you can usually do all the managing yourself if you wish.
My park as an example requires the present owner to visit once a week to do the water test,
or he has one of the tenants do it when he is on vacation. By owning the land he
only has to maintain the water, sewer and hydro up to the trailers which eliminates most of the
headaches a landlord usually has with renters. Expences with parks are usually around the 30-40%
range rather than 50% for buildings. These are all positive from my perspective.

No more owning and maintaining buildings for me all my tenants will do that themselves..

 

[Andy]

Hi Gregs,

Do the park close to the city? Who and how will you manage the park? Did you get the mortgage for that? How many of LTV and interest rate? Do you know what risks are for the kind of property? Thank you very much for your sharing.

Andy

 

[invst4profit]

Andy:

My park is 30 minutes from the city and is an adult community, mostly 50yrs+.
I will do all of the management, what there is of it, but I also have a contact on site
that I will pay to take water samples to the test lab once per week.
The most important issue with parks is the water supply. Mine has a entire new sustem of pumps, tanks, filters and UV treatment so all I have to do is learn how it all works and how to repair it. Not really that complicated.
I expect to be on site at least once a week and by getting to know all the residents I will be able to stay on top of what is going on.
I personally did a lot of research on rental propreties in advance and once I discovered MHPs I was sold on them being the least problems regarding tenants.
Keep in mind though there is a wide range of quality in parks and each has a different level of hands on management requirements.
If you have the time and are willing to work at it the most profit is found in parks that have been neglected and allowed to run down over time.
There is also money to be made in buying, renting,repairing and financing of trailers all within your own community.
The nice thing is it is a capative community that continues to pay there rent regardless of what happens.

 

[gregg]

How were you able to appraise the park? I have no idea who does this sort of appraisal. I imagine it is different from buildings. The park I am looking at has 41 sites and like yours has updated reservoire, pumps, UV system etc. Are you able to find suitable insurance? How about the sewage system, are you familiar with the septic system and field beds? Until I read your message I was sort of backing away from the idea as many people, some in the business recommended staying away from trailer parks however, I have a feeling they can be a good thing if handles correctly. Lots of people told me that landlording was a lot of work too and I have enjoyed it very much over the last year. Please let me know your thoughts.

Greg


QUOTE (invst4profit @ Feb 25 2008, 11:38 AM) Andy:

My park is 30 minutes from the city and is an adult community, mostly 50yrs+.
I will do all of the management, what there is of it, but I also have a contact on site
that I will pay to take water samples to the test lab once per week.
The most important issue with parks is the water supply. Mine has a entire new sustem of pumps, tanks, filters and UV treatment so all I have to do is learn how it all works and how to repair it. Not really that complicated.
I expect to be on site at least once a week and by getting to know all the residents I will be able to stay on top of what is going on.
I personally did a lot of research on rental propreties in advance and once I discovered MHPs I was sold on them being the least problems regarding tenants.
Keep in mind though there is a wide range of quality in parks and each has a different level of hands on management requirements.
If you have the time and are willing to work at it the most profit is found in parks that have been neglected and allowed to run down over time.
There is also money to be made in buying, renting,repairing and financing of trailers all within your own community.
The nice thing is it is a capative community that continues to pay there rent regardless of what happens.

 

[Andy]

Thank you very much for your information.

It seems a lot of jobs need to do and the property management is very important in commercial property.

Wat is the interest rate and if it is interest only for the seller take back? I want to talk to seller to do VTB. Could you let me know what the benefits are for seller to do VTB?

Regards,

Andy

 

[invst4profit]

Greg

Sorry I have been off line on vacation.
I did not have my park appraised and do not really know who you would go to.
Based on my own research I evaluated the park my self. NOI is most important naturally in determining the price. Park value is mostly driven by cap rate. You can also take the average lot rent multiply by 60 (for a park in good condition) and multiply that by the number of occupied sites to get a rough value. Vacant sites are only worth 25% of occupied sites. Rental income from park owned homes is added seperatly.
You then evaluate it based on what type of park you really want. As I have said the most labour intensive parks requiring the most work have the greatest return assuming you get them at bottom basement price. Park are ideal as an investment you can grow in value. Unlike an appartment or rental unit there are many ways to increase the revinue in a park.
As far as mine was concerned the water and sewer were most important to me.
As a back lash to the Walkerton situation many parks now have excellent systems assuming they have a good well.
I am already looking into buying one of the homes in my park and renevating it to resell.
As my park has below average rent for the area buying and reselling allowes me to raise the rent twice ($50 ea time) to help move them up to market value.
I did get insurance by the way- 2,000,000 liability for $1000/year.