Manufactured Home Parks: Helpful Hints

Be realistic in your expectations as they are not given away. Do not expect a fantastic immediate return. Your real profit will come from rent increases, or filling the park, or adding to the park. Manufactured Home Parks sell on multiples of earnings (Cap Rate), EG: Net income before debt servicing $40,000, sale price $400,000 = a rate of return of 10%.

Be realistic when you look at the park and the operating statement. Openly discuss the good and the bad. What appears bad may not affect the income or performance and there may be ways to correct the problem.

Be realistic on improvements. Don't estimate costs unless you are experienced. Don't build in costs that do not exist to try lowering the price-it doesn't work that way. Owners know costs. Most parks are owned for many years before they come on the market. There is usually room for improvements and creative ideas to increase revenue or lower expenses. Always be objective with ideas to increase income or lower expenses.

Vacancies occur for several reasons. Buying a park with vacancies is not necessarily bad as you are buying the current income only and there may be good future prospects to increase the income. Knowing other area park's rents and vacancies is somewhat important. The knowledge will determine whether rents should be increased and possibly where new tenants will come from.

Rents can legally be increased every 12 months on 3 months notice. You can charge a new tenant any amount you want when they move in if they sign a new lease. If they are taking over the old tenant's lease the rent is what is on the existing lease. Unlike apartments it's difficult for a tenant to skip out on the rent or be behind on rent. You have several resources to collect.

If the Park runs with an absentee owner (most Parks do), Management costs, free rent, free hydro and gas is all you can expect to save if you move into the park. The balance of your profit will be the net operating income after all bills and mortgage payments are paid. This is your return on your down payment (investment). EG: If after all payments were made for the year and the net income was $10,000 and you had made a down payment of $100,000 your return on investment (ROI) would be 10%. Returns range from 7% to 13% depending on location, size, benefits, mortgages, negatives etc.

The assessment authority has a method of computing assessments. Raising rents or sale price do not affect taxation initially.

There are over 1000 parks in B.C. and the majority are on septic systems and wells. They work and the costs of clean out, upgrading, etc, are already figured in the financial statement. If you are not familiar with septic or wells don't build up a mental roadblock. There are answers to everything and people to do the work.

Most mortgages are given on a 15-20 year amortization (homes are 25 years). This makes the payments a little higher but increases the amount of principal paid off each year (equity gain). Generally speaking you must have 40% down payment but there are exceptions to the rule. Some owners offer terms and may take a trade. If you want terms or trades discuss this point well in advance. If it ís the wrong trade or terms or down payment there is no sense in proceeding any further.

I am constantly in touch with mortgage lenders. It's a specialized field. I know where the money is and how to get it. Openly discuss your financial requirements. If they can't be met why waste your time.

Prepare a list of questions, sit with me if possible. I have a large file of information and feel I can answer any questions you may have allowing you to make a quicker, more knowledgeable yes or no.

Act aggressively if you are interested and don't procrastinate - you are not the only person looking for a Park. Even though there are over 1000 parks, there is very little turnover and the priced right parks sell quickly. There are always more buyers than sellers.

I am prepared to assist new owners with better rules and regulations, thoughts on income and expenses, marketing, expansion costs, help on Management. Your success is my success. I've been involved with Mobile Home Parks since 1976 and have a good feel for them. Feel free to use my knowledge.

Owners have a fantastic Association in the Province of B.C with a low yearly membership fee. www.mhpo.com. Check them out.