Testing Demand for First MHP

[Mel Adams]

Hi everyone - in the middle of analyzing what would be my first MHP. In terms of testing demand, I've looked at rental comps and SFH median pricing versus average lot rent/home rent and sale price of a new mobile home in the market. All seems to check out and there's a healthy spread.

I called around to the other MHPs in the area as a "prospective tenant" and found there's very limited or no availability across the board. 

The park I'm looking at isn't large by any means, it's a little over 30 lots, and is essentially vacant with only 3 residents, all in older TOHs (owner has had this park a long time, doesn't want to manage it or add residents). Our goal would be to fill it with TOHs by buying a few new homes at a time, placing them in the park, and selling them to new residents. Our thought with this is to use the proceeds to continue filling the park and maintain the quality. 

I'd like to put out a test ad as well, but do we use a stock photo as opposed to a picture of a home in the park? Is a test ad more applicable to POHs? 

Looking for any feedback as this would be my first one. Thank you!

[Mario Dattilo]

Mel sounds like you’re on the right track. Yes test ads are good. You can just use a pic of another home and not a factory stock photo.

All sounds good except I would caution you on buying a park with only 3 occupied lots. You’re going to be negative on cash flow likely for a while and buying, bringing in, setting up and selling is a great way to create a ton of value but it is capital intense and time consuming. Most people underestimate that process. It creates the most value but is also the hardest to do. 

I alway recommend new investors find a light value add deal that has in place cash flow and a clear path to stabilization with maybe some infill but not heavily weighted on it.

Doing a very heavy lift for your first deal is riskier but also holds you up from doing more deals as it will take you years to fill that up which will take a lot of your time that could be focused on more deals. Not saying you shouldnt buy it but consider the value of your time and your goals and see if taking on a heavy lift gets you there. 

My profile has some great resources for MHP investors. Hope this was helpful. Good luck with it.