In this episode of The MHP Broker’s Tips and Tricks podcast Closing Cocktail, Maxwell Baker, president of The Mobile Home Park Broker, interviewed company broker Eric Wanck on his “drama-filled” close on a park in Alabama.
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:
- Beautiful Carriage Mobile Home Park in Alabama brought The Mobile Home Park Broker Eric Wanck plenty of drama, but it was ultimately another successful close. (Max, 00:22)
- The drama came from both sides of the deal, reminding Max of the Mexican soap operas he used to watch as a kid. (Max, 1:19)
- The sellers first approached Eric two years ago when they wanted to get a valuation of the park and find out how to boost its value. Eric was acting as a consultant, another service The MHP Broker offers. Eric noted that the housing inventory was mostly park-owned, and that’s a hassle to a lot of buyers who would rather not be responsible for maintenance. Eric recommended that the park owner sell a lot of their home inventory on a rent-to-own (RTO) basis. By the time the park sellers came back to see Eric two years later they’d taken his advice and now about 70 percent of the homes were sold off or still had rent-to-own notes on them. This would make for a cleaner, easier transaction, in Eric’s opinion. (Eric, 1:53)
- The notes remaining were for short-term deals, generally three years. The residents were paying them off at different stages, which made it difficult to value the park deal based on the number of notes outstanding and their varying balances. (Eric, 3:18)
- Eric’s approach, in selling the park, was to be totally transparent about the RTO notes and their value. It wasn’t easy, but Eric was able to come up with a fair price for the park and what would remain of the existing notes. One potential crisis averted. (Eric, 5:40)
- The drama on the buyer side of the transaction came about when their financing fell through. The buyer had chosen the lender, but had still not closed with them after 45 days. It turns out that the lender was presenting terms that were unsuitable to the transaction. Eric responded by connecting the buyer with a lender he’s worked with, and the buyer also came up with another lender. After comparing rates and terms, the buyer went with his second-choice lender. All of this took valuable time, of course. (Eric, 7:11)
- The deal closed, but the confusion with the lender gave it about a 30-day delay. (Eric, 8:03)
- As a seller, it’s critical that you have all of your due diligence records lined up and ready. This will save time, and that means a quicker sale with fewer hurdles. (Max, 9:56)
Your time is always valuable, whether you’re the seller or the buyer of a community. At The MHP Broker, we have experience closing deals as quickly as possible. Call Eric Wanck or Max Baker at The MHP Broker, (678) 932-0200. Or drop us a line at info@themhpbroker.com.
Power Quotes in This Episode:
“There’s a lot of variables, and financing can be tricky. (Eric, 8:03)
“We’re here to help you out, kind of quarterback…your journey to sell your community and try to look out for the pitfalls.” (Max, 9:56)
“Time is money, and time kills deals.” (Regarding delays in closing) )Max, 9:56)
“So if you’re a seller, try to get your stuff (for due diligence) in order. That doesn’t mean don’t talk to us, so give us a call. We’re happy to chat with you about the standard due diligence list items that you’ll need when you put your deal on a contract.” (Max, 11:11)
00:00
Hello and welcome to the Mobile Home Park Broker’s tips and tricks. This is the podcast where we talk about mobile home park investing because that’s what we’ve been involved in for the last decade. Let’s dive into today’s episode. Here is your host, Maxwell Baker.
00:22
Hey y’all, welcome to another epic episode of the Mobile Home Park Broker’s tips and tricks podcast. As always, this episode is brought to you by the Community Price Maximizer. If you own a park and you’re in the states that we market to and work, practice, however you want to say it, you’ve probably got a postcard about our Community Price Maximizer with a free 800 number and a nice little QR code for you to scan with your telephone, mobile phone and shoot you over to a video of me, moi, talks about how we can guarantee you the highest price when you exclusively list with us and that is exactly what we did for this deal that Mr. Eric Wank just closed in Alabama, this beautiful park Carriage. Eric, congrats and welcome to the closing cocktail. It’s always good to see you, buddy.
01:15 Eric Wanck
Yes, absolutely. Thank you, Max, always good talking about closed deals.
01:19 Maxwell Baker
So, this deal had a lot of drama. I’m not gonna BS you listeners out there. It had drama on the sell side, drama on the buy side, like, it was filled with stuff. So it was probably about the most so you know, Mexican soap opera. I’m Mexican, so I used to watch those as a kid and they’re always very dramatic. So, this was one of those episodes where the baby was born and nobody knew who the father was. Not really, but just throwing a little spice in there to make you laugh. But Eric, give us a little tea on this deal.
01:53 Eric Wanck
Yes, absolutely. Well, a little background to start is these owners came to me like 2 years ago before we even got to the closing table and a lot of people maybe don’t understand that even though we are a brokerage company, we work trying to sell communities for folks, we also consult and so these folks reached out, we did a BOV, a brokers depending of value on this. Came up with some pricing, but it wasn’t quite where they wanted to be yet. It was all POH and we talked value, we talked strategy, and one of those strategies was taking some of the park owned home inventory off and transitioning it into tenant owned homes through a rent to own program. So, that’s what they did and when they brought it back to me here to sell, 70% of the homes were now being sold off. There was a few notes remaining that we add some value to but kind of a cleaner park, you know, obviously you’re not dealing with the in and out of all the park on home tenants and the maintenance of those homes.
02:56 Maxwell Baker
Question about that real quick about those;
02:58 Eric Wanck
Yep
02:59 Maxwell Baker
So, how are the notes set up? I know like, it’s kind of a crapshoot on, you know, how people sell them, how long the ammo period was, was it like a Traditional like 3 to 5 year note or…
03:10 Eric Wanck
Yep
03:11 Maxwell Baker
…did they just sell them for cash? Like, give us a little detail on that.
03:14 Eric Wanck
Yeah, that’s right. These were set up on short term notes, so less than 3 years…
03:17 Maxwell Baker
Nice!
03:18 Eric Wanck
…and what was a little bit unique about these, even though there was a structured formal note that they signed, tenants would make payments. When they had the money and they would make extra payments, a lot of them, if not all of them, were making more payments than they should have.
03:33 Maxwell Baker
That’s pretty rare.
03:34 Eric Wanck
Yeah, it was pretty rare. So the note balances, of course, kind of varied throughout, even though it’s gonna be 3 years, the seller said, look, they’re probably gonna be all paid off before that.
03:46 Maxwell Baker
So, how did you price; you know, and that’s a tricky thing. I literally just went through training on this with some of our new people, but I just want to hear it from you, like, how did you price, what, what were the buyers saying those notes were worth? You show a little color on that.
04:01 Eric Wanck
Yeah, so, I mean, we’re all about transparency and the most that I can be transparent with folks is to show them exactly what that RTO balance sits at today and we obviously we’re updating that on a thirty-day basis, so our marketing was always pretty fresh but they; you know, you’d be able to see what you’re actually buying into today. Granted, 30, 60 days when you close on the park, those balances are going to fluctuate a little bit but, at the same time, most folks are not paying 100% part value for the principal balance anyway. So, you are getting a discount on the note upfront in your purchase price and then it’s just a matter of transparency, you know, letting folks know where those notes stand as they’re under contract.
04:47 Maxwell Baker
How much of a; I’m gonna ask you the million dollar question that I know people are like, well, how much of a discount do you see? and I know it’s all over the board, but can you describe the asset, the mobile home, is what I mean by the personal property and you know, was it, did they pay, you know, face value of the note or did they discount it 10% like. You know, can you show a little color on that?
05:13 Eric Wanck
Yeah, there’s, there’s usually a couple of factors, and I have seen it a little bit all over the board, and there is a range that most folks come in at. Typically, there’s comes down to a couple of variables, seasonality of the tenants, how long they’ve been in those homes and two, what do the homes look like? Are they older, 70s, 80s models, you know, less than 6500 bucks, maybe they’re trying to sell them off or are they nicer homes? I’ve seen some RTO offer 45-50 grand…
05:39 Maxwell Baker
Yeah
05:40 Eric Wanck
…if not more so. You know, what quality of home and tenant are you acquiring there? and there may be some other factors, but those are kind of the two main ones that I can think of.
05:51 Maxwell Baker
Okay
05:52 Eric Wanck
That value to your question kind of comes in, you know, anywhere from 70%, and I’ve seen people pay close to, you know, 85-90% of that value.
06:04 Maxwell Baker
Nice! Yeah, that’s a crapshoot y’all, just, , the newer the product, the better the pricing and the seasonality. You know, curb appeal, credit score, how much money they put down, you know, what the condition; there’s just, there’s a basket case of variables and Eric is really good at evaluating these. We spend hours and hours just kind of woodshedding the theory behind the notes on mobile homes. So, obviously if you all have them and are looking to sell your park, or actually sell the note; like we’re actually working on a portfolio of notes right now is about, I don’t know, $7 million worth of mobile home notes, and we’re pricing them based off of those variables that Eric just mentioned. So, give us a call, happy to talk to you about that, whether you’re selling the park or just the notes on the mobile homes. We may have a buyer for you and we can open up that door here, if you call us (678) 932-0200. Eric, there was a little drama with the funding source. I’d love to unpack that with you.
07:11 Eric Wanck
Yeah, yeah, it’s anytime that we have outside financing, you know, we’d like to know who the lender is, we try to control the debt as much as we can. This particular buyer had somebody in mind that they went under contract; that they want to utilize, and that’s fine.
Our team can also source some debt for folks if they, if they choose, but this particular buyer has someone lined up, so. No problem. Well, it got to be 45 days down the road, and next thing you know, that particular lender was not providing terms that were suitable for them to close. Also, required a pretty decent retrade, and that’s not what we were looking to do. So, you know, we do go to Plan B, and if there’s a plan C that needs to happen, then we’re all about trying to find solutions, especially when we get a deal under contract and we’ve already spent 45, 60 days or beyond and trying to get the deal done.
08:02 Maxwell Baker
Yeah
08:03 Eric Wanck
So, one thing is sometimes it does require patience on the sell side, and things do happen, especially with mobile home parks. There’s a lot of variables and financing can be tricky. So, we stepped in, we actually helped them identify a lender that they ended up going to and get some soft quotes through and at the same time, they were working with another lender that they knew and they’re just kind of comparing the two and seeing which terms are gonna be best for them. Ultimately, they ended up going to the lender that they had chose. Thankfully, you know, it, it got closed, but it did give us probably a good 30-day delay in our transaction so that we could have the financing kind of wrapped up and approved.
08:49 Maxwell Baker
Yeah, that’s good, man. Well, any closing comments here, this is one of the longer ones, but there was a lot to unpack on this deal closing out in Alabama, so this is a repeat client or repeat deal. I think we sold this; the 2nd time we sold this deal, right?
09:04 Eric Wanck
Not the 2nd time we sold this one. We do have another one coming up that’s very familiar to us, but not this particular one…
09:10 Maxwell Baker
Okay
09:11 Eric Wanck
…but, you know, these buyers have, have worked through us before. I don’t know if they’ve ever closed anything, but certainly not new names. Hey, as long as you’re qualified, you understand the asset class, we don’t shun people away if you want to get into this business. You know, we had a lot of action on it up front. We got a really good price on it at the end of the day. You know, maybe there’s one thing that we can touch on, to not make this any longer, but one thing we can touch on is, sellers to make sure that you got a good due diligence file upfront when you’re looking to go under contract, try to put everything together that you can. So, that you can get that to the buyer as quick as you can, because a lot of these contracts are written that the due diligence does not start until all that material has been provided to the buyer.
09:56 Maxwell Baker
Yeah. What a pain in the butt that was, y’all. Eric navigated it like a champ. You know, it’s not uncommon. If you’re a seller, it’s not uncommon to have Not all your due diligence stuff taken care of and obviously, we’re here to help you out, kind of quarterbacks hit shotgun your journey to sell your community and try to look out for the pitfalls. This was one pitfall that was just to be blunt, we, we struggled with. Unfortunately, the seller didn’t have a ton of stuff and if he did, he had, he had to spend some time getting it together and it took weeks for us to get everything and as a seller of a community, Time is money and time kills deals. That’s like the biggest thing. You never want to have the ball in your court as a seller. You always want to put the ball back in the buyer’s court and most people are really good at that, but this is just one of those situations where, you know, he had limited help and it just took a while to get everything together. So, you know, what usually would have taken 30, 60 days to get done, and the whole deal, it took like 5 months. Just because of the variable of DD items and just a constant search for items and things that we do and did and didn’t have.
11:11
So if you’re a seller, try to get your stuff in order. That doesn’t mean don’t talk to us, so give us a call. We’re happy to chat with you about the standard due diligence list items that you’ll need when you put your deal on a contract. We’ve literally got, it’s like one or two-page document. That just says what to expect when you go on a contract and also a due diligence checklist. We’re happy to share that with you so that way when you call us, we’re happy to do the analysis, but also give you these documents so you kinda know what you’re getting into because selling mobile home parks is not like selling a triple net McDonald’s ground lease. It’s very different. There’s a lot of different business models. There’s a lot of different niche lenders that’ll play in this industry and we know a lot of them, not saying we know all of them, but we know a good amount, and we typically are able to get it funded if we can get all that due diligence stuff up front and if you don’t have it, that’s not a big deal, like we can still navigate it, but Give us a call (678) 932-0200. Eric, you got any final comments here?
12:16 Eric Wanck
No, no, I just pretty much hit it all, and I will say just on the due diligence, once I did get it, it was probably one of the best due diligence folders that I’ve ever seen. I mean, they, they literally mailed me over 150 pages worth of stuff.
12:28 Maxwell Baker
I think I remember seeing that come in the mail (laughs)
12:32 Eric Wanck
Hey, it all goes back and we’ve said this before on podcasts, the more information, more transparency, i.e., due diligence material that you can provide to buyers, the risk goes down and you will have not only a smoother due diligence period, but you can get; you can get good money for your park. You’re not coming back and having to worry about retrading. So…
12:54 Maxwell Baker
Yeah, that’s right.
12:55 Eric Wanck
Transparency is key.
12:56 Maxwell Baker
Yes, sir. Well, congrats again on getting this deal across the finish line. Great training moments that came out of it. Y’all, if you have a community that you’re even thinking about it in your dreams or maybe during the day about getting rid of it, give us a call (678) 932-0200. Ask for Eric Wank or email us at info@themhpbroker.com. (678) 932-0200 and as always, let’s keep moving forward. Thanks for listening.
