Due Diligence And The Turn Around Mobile Home Park

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Due Diligence And The Turn Around Mobile Home Park
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• Most common type of investment on the market
  today.
• But, can be the most dangerous.

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Due Diligence

• DO NOT skip this step and purchase a park based
  on unverified information
• If you dont feel comfortable with this process
  hire someone who is competent or purchase a deal
  from someone you trust

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Field items

• Planning and zoning office
• Code enforcement office
• Fire marshal
• Utility departments
• Street dealers
• Competing mobile home parks
• Apartment complexes

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Field items

• Chamber of commerce
• Tax assessors office
• Advertising sources
• Engineering department (permits)

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What to look for at the park

• Water system
• Sewer system
• Electrical make-up
• Natural Gas
• Roads
• Lot sizes/layout
• Landscaping

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What to look for at the park

• Parking
• Ammenities
• Cable
• Water drainage
• Extra land
• Talk to tenants

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Crunching the numbers

• Going through the profit and loss statement
• Verifying security deposits and income
• Making sure every expense is accounted for
• Calculate an accurate and current NOI

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Finding The Ultimate Value Play

• What am I looking for?
• Empty lots 50 optimum (break even cashflow or
  better)
• Sound infrastructure
• Decent local economy
• Below market lot rents
• Good local supply of repossessed mobile homes
• MOTIVATED SELLER

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Important Considerations

• Cashflow will be slim or non-existent for quite
  some time
• Capital () will be needed to acquire inventory
  (mobile homes)
• Changing community perception of park is
  possible, changing entire neighborhood is not

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Getting Down to Business

• Clean up the park/people
• Start refurbish or acquisition of homes
• Transfer utility costs to tenants
• Decrease operating expenses
• Increase lot rents

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Cranking up the 4 Profit Centers

• Rent vacant lots
• Increases cashflow
• Sell mobile homes on terms
• Creates paper equity
• Interest rate spread
• Creates more cashflow
• Increase park value (finding gold in the dirt)
• Creates long term wealth

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ATM Trailer Style

• This plan will ultimately lead to a cashflow
  machine with the added benefit of huge backside
  profit or equity
• Its a simple, repeatable system that will work
  over and over

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Common Questions

• Can I get financing for this type of park?
• Where do I get the money to buy so many mobile
  homes?
• Will it really work?

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Evergreen Estates

• Purchased park (69 spaces) for 280K
• 37 occupied spaces, 10 junk mobile homes
• 4,800 monthly gross income, 800 net monthly
  income

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Entity Setup

• We form an LLC to operate the park
• The Operating LLC leases the park from the Seller
  or a Private Investor
• We form an Option Trust to buy an option from the
  Seller or Private Investor
• This can be funded by Roth IRAs for Tax-Free Gain
• The entity which holds all the true value of the
  park

Owner Or Private Investor
Option Trust
Operating LLC
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Evergreen Estates

• Spent 9,000 the first 45 days cleaning up trash
  in the park/evicting bad tenants

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Evergreen Estates

• Immediately began refurbishing homes
• Average cost of rehab was 6,000 per home

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Evergreen Estates

• Installed water meters on every lot passed on
  cost of water to tenants
• -Saving of 600 per month
• Increased lot rents from 125 to 150 per month
  (market rates)
• -Increased income 800 per month
• Decreased expenses (removed 2 large garbage
  dumpsters)
• -Savings of 420 per month

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Evergreen Estates

• Purchased late model repo homes from finance
  companies
• Sold homes with owner financing and easy terms

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Payday!

• 23 months later gross income was 13,000 per
  month
• Sold entire park and mobile home notes for 635K
  cash
• 75K cash profit on sale of mobile home notes
  PLUS
• 160K profit Tax-Free in Roth IRA accounts on a
  2,000 investment. Question of the daywhat was
  my rate of return?
• GOOD ENOUGH!

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• Questions?