Trying to buy mobiles to remodel and rent- parks only allowing owner occupancy though?

Question

Hello,

I am in the Seattle area and new at real estate. Because wholesaling is so hard right now due to our booming house market we decided to switch strategies and look at buying a mobile to rent (so at least we have some cash coming in).

We have called on a few (in Washington state and some in Florida) and it seems as though a lot of parks require owner occupancy. Does any one have more information on this? Is there a loophole- is it law or park owner preference?

Thank you!

Natalie

Jim Johnson · Answer

The answer to this is yes- mobile home park owners can choose not to rent to an investor. The reason is not so much about competition as it is control. When your dealing with a home that is subleased in your park, there is an extra layer of complexity in the management. As the park owner, you want to qualify all of the residents. Well not every investor wants to follow that process. So you can end up with tenants that are not vetted, and have not been approved, and probably have not signed your lease or rules and regulations. Enforcement of the lease, rules and regs is more complicated. If the issue is with the home, you might be enforcing something on the investor, who probably has not signed a space lease agreement with you. Investors might choose to pay the space rent, which is all your collecting as a park owner. Well, if they do not pay your evicting someone who has maybe made their payments, but the investor did not. Remember if there are issues with a tenant, the recourse is to correct a problem and charge the tenant (home), a 'quit' notice concerning a violation, or terminate the lease. While the investor is mainly concerned with getting paid, the park owner is also concerned with additional issues mandated by the state mobile home act of the state, county rules, city rules etc... There are also concerns with a single person owning too many homes in your park. If you got sideways with them, they can pull all of their homes from your park.

While I am a investor friendly park owner, I do require some documents between myself and the investor to prevent issues. I also require a special lease that adjoins the investor and the tenant.

John Arendsen · Answer

Jim Johnson's answer is spot on. Most MH park owner/managers don't want that extra layer separating them from their primary tenant because they have no direct control over the sub lessee.

That stated, however, there are Park owners that will entertain this policy if the owner of the home is an investor who intends to help gentrify the park over the long haul. We own several MH's in various MH parks that we rent because we've been in this industry for almost 3 decades and the park owners trust our judgement in selecting good tenants and we always keep the homes up.

My suggestion is to interview some park owners, not managers unless they are the owner, tell them what your plans are and see if they'll play ball with you. But do be careful because most park owners will still require that you continue paying the rent.

There are some owners, however, that want investors to upgrade their park and will cut some slack for a few months while the upgrades are taking place. However, that is usually the exeption and not the rule unless you are a dealer removing an ole home and replacing it with a new one.

Natalie Kolodij · Answer

@Rachel  H.

Thank you so much for the advice! I know the few moments it takes you guys to comment may seem like a bother and I just want everyone to know how much I appreciate it all!

Roy Oliphant · Answer

Hi Natalie,

I'm looking into a similar strategy in Texas.  However (and even more so after reading this thread) I'm looking to acquire the properties through tax auctions.  There seems to be a real aversion to purchasing mobile home properties because the mobile home is often personal property even though it is on the tax roles.  This means you will get the land but the MH will still need to be dealt with.   Some properties are selling for less than the cost of improving a vacant lot (running utilities, grading, driveway, etc.)  So I'm looking to get them cheap and remarket them to new owners.  We already buy houses at tax auctions all over Texas so this will just be an incremental revenue stream but I have high hopes for it.

I'm all for anything that help provide more quality housing at affordable prices.  Mobiles, tiny's, non-traditional construction, etc., will all be important to meeting the housing needs of the future.  Glad you are looking to help this, too!

Roy

Jim Johnson · Answer

So to answer this question, owning a home and being an occupant are not the same thing. So you can own a home in a 55+ park.

Bob E. · Answer

Seems simpler to sell it with owner financing, just make sure you are Dodd Frank compliment when you originate the loan.if you buy right you should be able to recoup your original investment in year or two and then it is profit.  No need to pay taxes or do repairs as long as the buyer keeps paying the mortgage.

Not sure if the park owners would abject to that or not so I would find a park that will work with you and when you buy a unit tell the owner we are going to fix up the home and the will improve the park, and then we are going to sell to an owner occupant.  If they don't like that deal the move the unit to the new site.  In some parts of the country park owners will pay to move a unit in....

Scott Evans · Answer

Resurrecting an old thread but I had to reply.

We owned a park with 265 lots.  We were constantly turning investors down.  Dealing with investors never worked for us.   From a park owner's perspective tenants don't know who their landlord is if their renting from an investor.   Investor's don't want to field calls from irate park owners about their lousy tenants.

My all time favorite was seeing dirty diapers hanging from tree limbs outside the back door of a  home.  She promptly told me to get off her property.  She had no clue who her actual landlord was.  She may have been renting the home from someone else, but I owned the land she was parked on.

It also didn't help that a lot of investors really didn't understand the costs associated with owning a mobile home.  In many instances, repair work is actually more expensive than in a regular home.  Odd size tubs, very small vanities, small doors, that could only be purchased from the local MH supply house, often for 25~50% more than a standard size from the home improvement store.  While the repairs are often more, you can't (at least we couldn't) get good tenants due to competition from other lower income rentals nearby.  Occasionally we'd have good tenants, but for the most part we we're dealing with bottom of the barrel types.  We went from 30+ rentals down to 0 over a span of 10 years.  We couldn't seem to make it work and we owned the lot.  Investors would be paying lot rent during their down time.  It wasn't worth the headache owning homes for us.

Long story short, I'd rather have an empty lot than an investor owned home in my park.

Rachel H. · Answer

@Natalie Kolodij Most nicer parks (but not all) do not advertise themselves as "investor-friendly." Though, I will say there are investors in there. They just have a good relationship with the park manager and/or owner. When it comes down to it, it's all about building relationships and rapport. Though it takes time, it can be worth it in the end. Best of luck!

Rachel Townsend · Answer

We have one current normal rental and two more we are finishing that will be rentals. When my husband first started doing this fewer parks were allowing rentals, so he had to word the contracts as a sale. Now we are able to find a lot of parks willing to do rentals, even the ones who previously didn't allow them.

Natalie Kolodij · Answer

@Rachel Townsend

You said some homes are owner financed.....does that mean you have others thst are normal rentals? I'm trying to determined the liklihood of being allowed this before I speak with park managers.

Trying to buy mobiles to remodel and rent- parks only allowing owner occupancy though?

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