MHP What should I do?

Question

I a mobile home investor and I'm currently thinking of buying a mobile home park. I've talked to a park owner who's looking to sell. He has a park with 7 lots, 1 vacant lot, 6 with homes  4 park owned homes 1 is vacant, 2 owner occupied homes. Current lot rents of $100. I'm not sure what the current home rents are or the make up of the homes as far as bed/bath or sqft. According to the owner this is on 2/3 of an acre, Yes he said 2/3 of an acre. 7 homes on 2/3 of a acre seems a bit much. He's asking $90,000 and he's for $30,000 down and willing to owner finance the rest. He's open to other creative financing I don't know exactly what but he's open. I currently have some family members that are willing to invest but I'm not sure how much time and or money. So I need to know what to do as far as my due diligence? Financing? Partnership? I'd also like to know wwjd? @johnfredo

Alphonso Clark · Answer

Hello guys,

John the lot rents in this area vary from $100 to $300 a month so it's on the low end. I was thinking of rehabbing the homes and renting them out my thinking is this will be where my profit comes from since this is a small park. They are on city water and sewer and they're on separate meters.

Rob thanks for those suggestions I'll be making those calls tomorrow.

Brad I'll do this when the owner can meet me there.

Thanks guys

Brad Richard · Answer

i recently looked at a park for sale, and I would recommend going to the park with the owner/agent and spending some time with them walking through the park, taking pictures/video, asking all your due diligence questions and speaking to tenants if they are outside and friendly.

The reason I say that is because a park in-person will be much different than on paper.  For example, the park I viewed is an "8 space" park, however there are seven homes, 2 known vacancies and upon our arrival we discovered a third vacant home needing repairs and cleaning.  In addition, lot rent had not been sent to the absentee owner in nearly a year, so the park manager has been taking advantage of said owner for quite some time.

Just my experience so far, hopefully will help give you some insight.  Best of luck

Rob Chamberlain · Answer

Hi Alphonso,

I just bought my first MHP a few weeks ago and I can tell you some of the things I considered.

1. Check if in flood plain

2. Ensure licensed for the proper # of lots. Usually through state board of health.

3. Check if all back taxes are paid

4. Get title insurance, when my property was being reviewed, 2 liens were found and needed to be resolved

5. Verify rent roll records for on time payment.

6. Get as much info as possible on utilities. (water and sewer source)

7. Are any trees in position to damage an homes from falling limbs?

I focused my due diligence on potential liability and future capital expenses. Also ensure you evaluate the value of the park for the lot spaces and then add the park homes on top.

I bought my park in a small town a few hours away that I don't know very well, so I met with city officials, the police chief, and a local mobile home park dealer to get their input.

Hope this helps,

Rob

John Fedro · Answer

Hi Alphonso,

Great job pulling the trigger and reaching out to so many local park owners. Really well done. I like that you took the straightforward approach just started searching out parks for sale and calling away. Keep up the great daily effort.

Seven lots will certainly not make you wealthy however it can be a nice little income producer when it is all set up and running right. Seven lots also does not give you room for a park manager however if it is nearby it should not be difficult to manage, or you can hire out a property management company.

Is $100 and appropriate lot rent for this area? Would you consider selling the mobile home with monthly payments and getting only owner occupants into the park versus continuing to rent the mobile homes? Repairs and other deferred maintenance is also a question that needs to be answered? You didn't mention the utilities, are these well and septic tank, city water and sewer, or other?

With only seven lots and two thirds of an acre I also would asked the question if this is a true permitted mobile home park, or simply a small piece of land the owner has added more and more mobile homes to over time. If this land is grandfathered in like this then you may not be able to replace a mobile home if you remove one. However this may or may not be the case and will be solved with a quick call to the zoning department.

Some people may tell you that seven lots is not worth your time. In reality every deal is different and every investor is different. Because this is your first park this might be the perfect and safe opportunity for you to get in and establish yourself in this niche.

There is definitely much due diligence to proceed with moving forward. However once you know the net operating income the park is currently bringing in, then you can formulate an offer to purchase this park from the seller. It sounds like the seller is fairly motivated. If this is the case I'm curious why. A hunch would be because the park isn't generating any revenue, but I certainly could be wrong.

This Park could absolutely be a good deal for the right price and terms. Due to the condition of the park and the sellers motivation it sounds like you are in contol to make an owner financed offer that allows you to recoup your investment back quickly and allow the park and selling the mobile homes to pay for itself.

I hope this has been somewhat helpful for pointing you in the direction to gather more facts and move forward at least making an offer. As a mentor of mine said, "Price cures most worries". If you can get the park for the right price and terms you will be profitable and in a save position. You will definately have follow up questions and thoughts. Don't hesitate to comment back. We're all here to help one another.

There are a lot of other active mobile home park investors on this website with valuable experience. @Jefferson LillyIs a great source of information as well and I be curious to hear his thoughts.

Talk soon and keep us up-to-date with your progress moving forward,John Fedro