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

Account Closed · Answer

This is really a small park. Is this local to you?  What kind go homes are they.  At the prices you mentioned relative to the lot rents, the park is priced to high.  But if the market is really a much higher lot rent, that can make a difference.  You have not mentioned anything about the utilities and who pays for them as well.  That will be very relevant especially being that the park is so small. The numbers you are describing looks like they give a density of 10.6 per acre ( and that includes the vacant pad). I believe the standard frank uses is 7 as perfect , 10 as fine so that should not be a hinderance.

Yes you will have to do thorough DD and make sure it is a legal non conforming park etc. Buy the MHU due diligence guide if you get serious about the park, there is no substitute for that.

Post some more info on when you can .

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 definitely 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

Mindy Jensen · Answer

I'll tag @John Fedro for you. You spelled his last name wrong.

The more I read about MHP, the more interested I get in them. There is one across the street from my daughter's school, and I watch them replace the older units with nicer ones all year long. Very interesting business model. I'm following this one...

MHP What should I do?

Most Popular Reply