Is it OK to…?

Question – Paraphrased conversation – “I talked to a park manager and they have 4 units that I can buy in a group. They say after they sell to me, I need to bring them up to code. I want to buy a couple that are older than June 15, 1976. The buy prices are only $1000-$1500. And they’ll sell fixed up for $9k-$15k. Isn’t that ok if it’s a good deal?”

Answer – Well… as the saying goes… that depends!

OK several things.

Some parks own units and some do not. Park buyers will buy a park and sell off any park owned units. It is better financially if they just rent the lots and not be a landlord.

I would find out why they are selling?
Is it – because they are new park owners and don’t want to own?
Is it – that these need a LOT of work and they don’t want to do it?
Is there another reason? If so, it’s best to know what that is.

I’d also be cautious. If you are buying for $1000-$1500 and sale price is only $9,000 to $15,000 what will the profit be?

We like to make at least $10k net on each deal. NOW truly we have made a lot less but didn’t do any work on them.

For instance, buy for $1250 sell for $5k as is a few days later. Buy for $3k sell for $10k the next day as is.

They said you need to bring them ‘up to code’. If the units are older than June 15, 1976 the park may ask you to bring it ‘up to code’ like newer ones. We had to do that in one park we worked in. This can include:

1 – Sheetrock around the heater compartment (fire block = doesn’t burn as fast as wood) and hot water heater (fire block). You ‘may’ need a permit and inspection after work is done, to pull a hot water heater for this job.

2 – Sheetrock for 6 inches from an open cooktop. Stove is fine.

3 – All plugs and switches had to be upgraded = $500-$1000 depending on handyman/electrician. We got a bid of $4800 from one guy. He seemed offended when I asked him if he thought it might be a bit high?

4 – Egress (escape) windows in all bedrooms. Most expensive. Windows are $150-$300 depending on where you get them. Labor can be $50-$250/window.

So… find out why they are selling at such a ‘good’ price?

Bring them up to code could be park imposed guidelines. Fences, newer windows, roof, porch/deck, etc. We had one park insist that we put a fence and shingle roof, even though the metal roof was in excellent condition. They wanted to ‘upgrade the park’. That’s fine but had we done that we would have spent our profit on upgrading the park. Not our park. So we wholesaled it to another investor with the understanding that they had to do the fence and roof. They did, and as expected, lost their profit in the upgrades. Has not done another deal since.

And is it worth all the trouble, effort and expense for $3k to $4k. In this case, we’d say most likely… NO!

Have fun!

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