The MHP Brokers Tips and Tricks Podcast Summarizing The Mobile Home Park Broker’s Sellers Guide

The Mobile Home Park Broker's Tips & Tricks To Investing

In this episode of The MHP Broker’s Tips and Tricks podcast, Maxwell Baker, founder and CEO of The Mobile Home Park Broker, will discuss the company’s Sellers Guide, a book he authored with valuable advice for selling mobile home communities.

As with every Tips and Tricks podcast episode, this one is brought to you by The MHP Broker's proprietary Community Price Maximizer. Use this four-step system to get the highest price possible for your mobile home park or RV community when you sell it through The MHP Broker. Guaranteed. Call Max for details.

Here Are the Show Highlights:

• Max overviewed and read directly from the book he wrote to help mobile home community sellers recognize and avoid disastrous obstacles, bad decisions and sleazy buyers and brokers. (Max, 0:22)
• You’ll learn how to pick the right broker and dodge the wrong ones. Here’s how Chapter One starts. (2:03)
• Chapter One of the Sellers Guide starts by highlighting the importance of knowing the value of your park before it goes on the market. It can be equally disastrous if you price it too high and drive buyers away, or leave money on the table by pricing too low. Make your park as attractive as possible before it goes on the market by improving the infrastructure, cleaning up books and records, and making other changes that improve curb appeal and heighten buyer interest. The better the the condition of your financial records, and the more data you have, and can show interested buyers and their lenders, the more money you’ll make. Also, keep up the reputation of your community. Get rid of the riffraff. No one wants a park where the police are called in nightly, (2:35)
• It might be tempting to do a lot of cash business as you run your park, keeping your tax responsibilities low, but that will bite you in the ass when you go to sell your park and it looks, by the records you do release, like the park made very little money. So keep clean, honest books, pay your taxes, and make more when you sell your park. Buyers and lenders want to see receipts and deposit slips as proof of what you say you make. (5:00)
• The less risk for the buyer the better when it comes to sewer and utilities. Septic systems can go bad and have to be expensively replaced. City water and sewer and roads are always a prime attraction in a sale because these responsibilities can be ignored by the new park owner. (10:13)
• Max frequently gets emails from rookie investors looking for 10 percent CAP deals, and he laughs them off. 10 CAP deals go off the market very quickly, and not to newbie buyers. Get realistic. Also, the least desirable parks are those with lagoons or privately owned sewage treatment plants. (11:30)
• When it comes to park-owned homes on your property, institutional lenders don’t like to see many. Community lenders, on the other hand, are more generous. Institutional lenders generally like to see no more than 15-25 percent of homes to be park-owned, though it can sometimes go as high as 30 percent. Park-owned homes can also be a stumbling block for buyers. Many don’t want the responsibility of having to keep up with maintenance and repairs, and would rather have a park full of tenant-owned homes. (12:27)
• The most valuable communities are those where the city owns and maintains all of the roads, and the water and electric utilities are direct billed. Dirt roads command the least respect by buyers, but it’s helpful if at least those dirt roads are owned and maintained by the city. (13:32)
• Your buyers are also going to be very interested in knowing about your park management. Do you have someone on site? Will they want to stay on for the new owners? Some buyers prefer to install their own professional management team, but it’s a subject of critical importance during negotiations. This is where the topic of park-owned is back in the conversation. If you have a lot of park-owned homes, buyers think they’ll have to have someone on-site for a lot of repairs and maintenance. If it’s mostly tenant-owned homes, they might feel more confident that it’s more of a turnkey operation nd they can operate the park from afar. At any rate, be ready to discuss the management situation. (14:17)
• Chapter Two of the Seller’s Guide is about some common mistakes park sellers make. First of these is to miscalculate expense ratios. Unless your park is big on such hands-off features as direct billing of utilities, and city-owned roads, your expense ratio is probably in the neighborhood of 30 to 40 percent. (17:47)
• Another leading mistake this chapter points out is the failure to prepare the park for sale at the highest possible price. You want to put it in its best light possible, even if it’s just a matter of cutting the grass, getting rid of debris, and patching potholes if you own the roads. This cleanup might not be as important if your park sits in the middle of a retail center and your prospective buyers are all developers who plan to tear the park down and redevelop the space. Otherwise, basic cleanup can put thousands of additional dollars in your pocket that you’ll miss otherwise. (19:10)
• Big seller mistake #3, according to Max’s book, is not being honest and straightforward with your management team about your plans to sell the park. Your on-site manager is at the heartbeat of the community. Everyone knows them, and you don’t want this person spreading rumors or bad vibes. Buyers can smell turmoil in a community, and they want no part of it. They also don’t want an on-site manager who might be pissed off and leave right after the deal closes. (22:16)
• Another mistake can be doing business with Wall Street “wheeler-dealers” without having a broker like Max and his people on your side. Max made this point with an anecdote about an Alabama park seller who asked him to review a deal by Wall Street types. The buyer was demanding 120 days due diligence that wouldn’t even start until the seller turned in a load of requested paperwork that could take 30 days to acquire. The lesson here, according to Max, was to not try to deal with the highly educated Wall Street types without having someone on your side who understands your culture, speaks your language, and knows how to run a deal that’s fair to the sellers. (25:29)
• Once the Alabama seller dumped the Wall Street guys who wanted to close in something like 180 days, Max was able to get them a buyer who closed in 45 days. (29:31)
• The next big mistake sellers make is neglecting to formulate an exit strategy. They’re going to get a lump sum of cash, and it’s in their best interest to be able to keep as much of it as possible. That means knowing how to invest that lump sum and reduce your tax load as much as legally possible. Max works with, and can put you in touch with, tax experts who can help you negotiate your state and federal tax load. (30:27)
• Another big mistake park owners make is with insurance. They might carry too much homeowners insurance on old homes worth no more than $5,000. On the other hand, they won’t have liability insurance, which can leave them liable for getting sued for a dog that bites someone, or someone wanders into the community and gets hurt. Rethink your insurance coverage. (32:42)
• Chapter Three of the Sellers Guide is about how to cash in on your financials. Keep good books, is the bottom line. Have at least two years of tax returns you can show a buyer or lender, and at least eight to 12 months of rent deposits. To illustrate this point, Max told of a seller in mid-Georgia who “didn’t like to pay taxes.” He also didn’t deposit rent checks. He had a nice, tidy park, but zero financials. The only interested buyer said he wanted a six-month close. During those six months, he wanted the seller to deposit rents in a bank so he could prove the revenue generated. During this very long closing, COVID took place, the buyer’s partner left, and the deal fell through. The lesson: have your financials clean and lined up, ready for inspection. AND PAY YOUR TAXES! (41:21)
• Another mistake with financials that sellers make is in not keeping the titles for the mobile homes they own. Typically, a community bank is going to want to see the title for every park-owned home in the deal. For some reason Max doesn’t fully understand, big institutional lenders tend to care less about those titles. Max can usually still get the deal done if you don’t have titles, but it could be more of a hassle than you need. (44:33)
• Owner financing can be a very good thing for sellers. For one thing, they can get a better price. It’s worth the extra money for the buyer, who gets to avoid the multiple hassles of getting loan approval from a bank or other commercial lender. (47:03)
• Max can show sellers how to put together a good owner financing deal, at slightly higher than market interest rate with 20-50 percent down. (48:21)
• Chapter Four is on tips to prep your park to maximize your sale price. First impressions are critical, so make sure your community is as aesthetically pleasing as possible. Such niceties as landscaping and freshly paved roads do matter. (50:46)
• Replace and install skirting around your homes and pressure wash the gunk off them. Get rid of rust spots on metal roofs. (52:22)
• Max points to a park in Birmingham, Alabama. It was an ideal community in a lot of ways: city-owned roads, city water and sewer, etc. But the grass was overgrown, the park sign was old and hidden in vegetation, there was moss on the homes. Max recommended a series of improvements, but the next time he came by almost none of them had been done. The owner said he was old and just wanted out. So Max sold the place as is. It was a park worth $1 million, but he got only about $800,000. For, at most, less than $25,000 in general cleanup and improvement costs, the retiring owner lost about $200,000 in sale price. Not very smart. (54:29)
• The title of the next book section is, “Appraisers and Buyers are Eagle-Eyed.” In addition to looking at the financials and curb appeal, bank appraisers look at sale comps–what similar properties are selling for in the market. That’s why Max’s company stays current on sale and rent prices and can provide lenders with the information they need to evaluate sale price. This is a valuable selling tool. (56:04)
• In Chapter Five, Max has indicated five kinds of buyers (including one to be avoided at all costs.) This includes The Turnkey Buyers…they want deals where they won’t be needed day to day because on-site management is in place, as is direct billing, high occupancy, etc. But they’ll pay for that hands-off ease, so they’re good buyers. Retirees…are looking for a good place to live, as well as a business. Your park will be appealing to them if it’s in the Sun Belt and a quiet community. Value-Add Buyers….want properties that they can get for a bargain because the parks need work. These are often in secondary or tertiary locations. They’re good buyers to find if you basically want out without doing a lot of work to maximize profit, but others go around all the time making inadequate offers on properties, which makes Max think of them as time vampires because they just suck the time right out of you. First-Time Buyers…these buyers might have gone to seminars and are trying to work “no money down” deals. They often have little or no money, so they can be tough to work with. (1:00:39)
• Scam Artists are, by far, the worst type of “buyers.” Max has a database of these individuals and he actually labels them as “Scam Artists.” These people never put up earnest money, they make big promises and have no intention of delivering. Max and his brokers immediately recognize these people, which is yet another reason you need The MHP Broker, to help you avoid wasting time with Scam Artists. The Max team can also immediately identify other buyers by type, and know how to relate to each. (1:01:10)
• Chapter Six of Max’s book deals with the risks of trying to sell your park by yourself. You need a professional, extending professional guidance and mediator services when you sell. We can direct your community to the right kind of buyer and be able to tell you whether or not a buyer is legit. We’re professional negotiators who can help you get the optimal price for your community. (1:03:21)
• One section of Max’s book, “Mythbusters” blows up the myth that you, the park owner, can easily sell your own property and make more money than if you hire a broker. In truth, you might be left vulnerable to wheeler-dealers or scam artists who can leave you hundreds of thousands of dollars shy of what you should be able to sell our park for. (1:08:06)
• Chapter Seven deals with how to get the RIGHT broker for your deal. Hiring a specialist is always your best option. In other words, a real estate agent who only deals with mobile home parks as opposed to one who might sell commercial real estate or traditional homes. This market is unique, and it needs someone with a unique skill set and area of experience and expertise. Max has, over his 15 years of experience, identified several versions of the WRONG broker: the Wheeler-Dealer Brokers…they’re fast talkers who come across as untrustworthy sales guys. Then there’s the brokers who promise you an unrealistically high sale price, one that’s nowhere near what the market will bear, just to get the listing. The Brokers Who Buy Listings…want to get your listing at any cost. They don't care if it doesn't sell, because they're using your listing to get more listings. They just want to look busy in their marketplace. (1:11:04)
• Max has also identified so-called National Brokers…those who say they operate all over the country–and they might–but they don't have a clear idea of where your market rate is at. If you’re in rural Georgia, you have no interest in what mobile home parks are going for in Boulder, Colorado. Maybe the worst broker is…The Ghost Broker…that’s the one who basically disappears as soon as your property goes under contract. It’s as though this broker’s job was to get the listing..not to actually sell the property. That’s hard work. (1:13:30)
• And finally, there’s The MHP Broker…These guys have researched the entire state and found out where rents are at, and have identified the most active buyers. They set realistic sale expectations and stay engaged once your property goes under contract. The MHP Broker stays two steps ahead of all situations on your deal, so we can put out any potential fires before they even happen. This broker will advise you to possibly make improvements to increase your price and lower the park's perceived risk profile. Finally, your The MHP Broker team has connections with most, if not all, of the local lenders who will finance the deal in transaction for you. This brokerage team only deals with mobile home and RV parks, and is a one-stop shop for anything related to this industry’s marketing and sales because we do it every damn day. (1:14:20)
• The book’s next section is called “Thinking Regional.” It’s here where we present the way we do business, with the regional data that matters to you when reaching for an optimal price. We crunch numbers to see what the local economy is like, employment, culture, and the mood on the ground. All that and a lot of other numbers that help us set optimal sale price strategy. 1:15:25)
• “Thank you for listening to this summary of my book,” says Max Baker, signing off of Sellers Guide. (1:17:46)

Are you thinking of selling your mobile home community? @Wo\uld you like to get optimal price–guaranteed. Reach out to Max Baker at The Mobile Home Park Broker, [phone]. You can also drop us a line at [e-mail]. While you’re at it, ask for your free copy of our Sellers Guide.

Power Quotes in This Episode:

Failing to research a plan and exit strategy can spoil your future or leave you vulnerable to excess taxation.” (30:27)

“The more information you have, the higher the price you’re going to get.” (35:56)

“...appraisers look at your property much like buyers. They'll examine the local lot rent and their sales comps. They're going to look for curb appeal and for what the park's first impressions would be due to its current appearance. (56:04)

“We do come across bad eggs (among competitive brokers) every once in a while, we label them as Scam Artists in our actual database. We all know that every industry has them. These people do things like re-trade deals for no reason right before closing, never deposit Earnest Money, make big promises with no intention of delivering. (1:01:10)

“We have the ability to ask the right questions, interpret prospective buyers’ answers, and gear the marketing of your community to a certain type of buyer.” (1:03:21)