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Buying and selling mobile home parks is a great way to create passive income — if you do it right.

The trouble is, there are several tiny factors that are powerful enough to gobble up all your margins and ruin your passive income dreams. 

In this episode, I’m revealing the top 3 tips for a seamless mobile home park closing so you can get the passive income you deserve.  

Here Are The Show Highlights:

  • How to prevent bad apples from guzzling up your earnest money (2:53)
  • Why exceeding a 30-day due diligence period will make your deal blow up in your face (5:16) 
  • The “Calendar Days” trick that helps you close more deals in less time (and prevents you from sabotaging your deals) (7:56) 
  • The surefire way to make sure your closing attorneys don’t wreck your deals — especially if they’ve never closed a mobile home park before (8:24) 
  • How adding prorated rents in your contracts prevents nightmares during closing that can destroy the deal (9:27) 

If you’re interested in learning more about the Community Prices Maximizing System that guarantees you’ll get the highest possible price from your mobile park homes, shoot me an email at info@themhpbroker.com or give me a call at 678-932-0200.

Read Full Transcript

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's your host, Maxwell Baker.

Maxwell: Hey, y'all. Welcome to the Mobile Home Park Brokers, brand spanking new podcast. I'm pleased to announce we just started this new thing. It's going to be talking about all the tips and tricks that you can get your hands on, while operating or buying, or even selling, your mobile home park here in the southeast or even nationwide.

This broadcast is brought to you by the Community Price Maximizing System that is a proprietary system here at the Mobile Home Park Broker that will guarantee you a higher price when selling your mobile home community.

Today, we're going to be going over how to have a seamless closing when you are purchasing or selling your mobile home park. I'm going to give you three tips. Those three tips are: [01:06.2]

Critical date sheets.

Calendar days versus business days.

And giving you the job description that we have started doing for our closing attorneys.

Let's go into the podcast and talk a little bit about what this means and these three tips, and what they can do for you.

The first thing we're going to go over, y'all, is the beautiful and amazing, outstanding…I'm trying to think of as many adjectives as I can here for the critical date sheet that we have spent years in development and trying to figure out how to close the most efficient way on a mobile home park.

The critical date sheet is a very unique thing that we have developed over the last decade and it includes a lot of things that you're going to need when you put your park on a contract. The first thing that you're going to want to know about, and I'm happy to share this with you, all you’ve got to do is shoot me an email at Info@TheMHPBroker.com or give us a call at (678) 932-0200, and I’ll shoot you a PDF of what we use. [02:15.1]

But back to the subject of pain here and what we'll talk about is basically what we have, a single-page document that has the earnest money, when it's due, whether or not it's been deposited and whether or not we have a PDF for it, comments section, and then received documents, your due diligence period with title commitment, physical inspection, books and records, financing contingency, when the money goes hard, and what everybody loves, the closing period.

Let's go over each one of these.

Earnest money deposit. A lot of these people out there that I have seen, not to say a lot but a few, we have a few bad apples out there that will never deposit the earnest money when they put your park under contract, which for me is a little slick, but we see it all the time. [03:11.0]

In order to nip that in the butt and to force their feet to the fire, we ask for proof of deposit that they're earnest money is there or some sort of email from a closing attorney that they have received the earnest money and it's in there. That's the first thing. We make sure it's deposited and that's why there's a status section in this document to let us know whether or not we've received that. If it's in the email, that's great. We'll just PDF it, throw it in Dropbox and save it for a rainy day if there is one.

Next, the received documents. This is something that is not everybody uses, but we like to use because the buyers out there are always going to have different things that they're going to need when they are going through due diligence to buy your park or buy a park, depending on what coin side of the coin you're on.

The receipt of documents is a document, a single-page document, much like everything we use, to show that the buyer and seller have delivered and have received all of the due diligence materials that were requested upfront. [04:14.1]

There have been so many times in my career—slammed my head against the doors is why we've created this—that we'll put a deal in our contract. The buyer will come to the table, This is what I'm looking for, and we send them receipt of documents and then they just say, No, no, no, and a month goes by and now we're still asking for more due diligence items and then due diligence hasn't started.

We typically have them sign this document in order to officially start due diligence or you can just remove it all together and just have due diligence start after the earnest money deposit has been deposited and we have proof of that. It just depends on your deal. It depends on how you're structuring the deal. It depends on how your contract reads. We like to know what is being delivered is what is being received and that everybody's on the same page, so the due diligence time clock starts. [05:04.8]

Then you've got your title commitment, 30-day lock, 60-day lock. We don't even mention the 90-day lock because that's no bueno when it comes to selling a park. Time kills deals. As a broker, I'm always going to be pushing for a 30-day, maybe 45-day due diligence period every single time we're negotiating a contract with a buyer. That's good for the sellers because obviously we represent the seller most of the time on these exclusive listings and our job is to get the deal closed as quickly as possible.

Sometimes it'll go a little longer. It depends on how complicated the deal is, but if you've got a lot-rent deal, city water and sewer, dedicated roads, no park-owned homes, I mean, you don't need 90 days, y'all, to get a deal done, unless it's getting financed. Then all-inclusive 90, but due diligence should end in maximum 30 days unless there's something there. We typically try and get that as short as possible. [06:05.3]

The financing contingency is always there. If they're getting a bank loan, I don't allow really any of our buyers, or “try not to allow” is really the better way to say that, to put a financing contingency if it's owner-financed. No, y’all, if you need a financing contingency on owner finance, what are we doing?

But then, after that, we’ve got to go hard date or when your escrow money is refundable or nonrefundable. I typically like to try and move that money over to the seller. As soon as it goes hard, that way the seller receives the funds versus sitting in escrow is what I mean, and just letting it sit there. If it's nonrefundable, let the seller have it. We typically try and push that in the contract upfront. [06:52.9]

Then you've got your closing and the closing is obviously everybody loves closing. As a broker, we live and breathe and die with our closing, so that's very important for everybody. That's why brokers are always in a rush to get to the closing table, because they know that's when everybody is going to get paid and everybody's going to be happy when the title transfers, and that's when you guys get that passive income, which everybody loves in this business. That's why you're listening to this, because you like that passive income.

The other thing we put on this single-page critical date sheet is the vendor sheet, which has all the surveyors, the attorneys through the buyer and seller contact info. That's actually on a top bar, but the vendors are going to be anybody that's involved in a deal that just helps to get it done, bankers and whatnot. Then we have our own contact information there.

So, that's the first tip. The second tip, calendar versus business days. I have fallen victim to that. I have seen people use business days when they are looking for extra time and calendar days. If they're trying to get to closing faster. I always try to use calendar days in all of my stuff because obviously it gets to closing faster versus the business days, but that's tip number two. [08:05.9]

You want to make sure that you’re very specific upfront, and I always have my brokers that work with me review that and make sure that we are always looking for those calendar days, so that's what we're always going for. We're trying to get to closing as quickly as possible. That's tip number two.

Tip number three, giving the closing attorney a job description. This is extremely important. Every closing attorney all over the country is going to be different. Their style is different. Their background is different. Their education level is different. If they've never closed a mobile home park, sorry to say, y’all, but it's going to be real, real rough. It ain’t fun dealing with a closing attorney that's never done a mobile home park because you've got titles. You've got deposits on utilities. There are just so many things that you need to know about when closing a mobile home park. It's not like closing a regular residential house. It’s way different. [09:02.7]

With that said, we give them a job description and, in that job description, what that includes is, when we submit this critical date sheet, they're the ones checking to make sure the days are correct. We're not attorneys, so we give them a document and let them negotiate it out with the buyer and seller. Sometimes it's just one attorney and, as long as everybody agrees to it, we move forward.

The second thing is how they're going to prorate the rents, y'all. Man, that is a huge, huge, huge nightmare if you don't get that figured out upfront. We always put that in the contract. Now we've actually just updated recently to include weekly, monthly, biannually, annually, even daily. Even daily. Daily rants are very hard to prorate, but it is the attorney's job to figure out that math. [09:58.5]

Whenever you have the money that's been collected on an annual lease, it's based off whatever is negotiated upfront. Let's get that done up front. We put that in the job description for them to figure out, so that way, when we get to closing, it's just about closing. It's not about negotiating all these other variables. Get all that stuff done upfront.

Recap on those three tips here: we've got the critical date sheet. We’ve got your calendar versus these days, and we've also got the job description for your closing attorneys.

Obviously, we like to use, going back to the attorneys—this is a last little recap—we have attorneys that we like to use that we know are very good. Some of them are a little expensive, but you get what you pay for, and if you don't have to sit there and educate them and they know what they're doing, you're going to have an easier closing. But the attorney's job is to close the deal. The attorneys, sometimes they feel like their job is to kill the deal because it all makes sense, but y'all all have to make the decision whether or not it's a good deal or bad deal. We're all big grown adults here, so keep that in mind. Kind of got on a tangent there, but let’s wrap it up to the last, giving them the job description. [11:12.1]

With that said, I want to give you guys a little taste of what's going to happen on the next podcast and that's going to be how to work with counties that put illegal ordinances on mobile home communities or RV communities to make it very difficult to operate a mobile home park in certain counties. Here in Atlanta, we've got several that insert these really weird ordinances, but we'll be going over that on the next podcast.

I'm really excited that you guys could listen. This episode is brought to you by a proprietary method that we have coined, the Community Price Maximizer. What this system does is it allows for us to look under the hood of your mobile home park or RV park, give you some pointers. It's a four-step process and it will guarantee you a higher price when you list your mobile home park or RV park with us. [12:06.4]

Just wanted to let you guys know that that's available. If you want to give us a call, my phone number here at the office is (678) 932-0200, or shoot us an email at Info@TheMHPBroker.com. Look forward to hearing from you.

Thanks for listening.

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