Is There Value in an Empty MHP Lot?

Question

We are interested in purchasing a mobile home that's currently in a park. The house is in really poor shape, but priced accordingly. I'm wondering if it is a better option to put work into an old run down unit or to just demo it and put a brand new mobile home in the same space. There are currently no empty spaces in any mobile home park in my town at all, so my question is if we decide the unit isn't worth fixing, should we still pay to buy it in order to have that space in the mobile home park? Thoughts?

Curt Smith · Answer

This poster should read in this forum about the challenges of renting MHs in parks.  Search this list for "lonnie deals", "renting mobile homes in parks".

Even if the MH is free, you are still on the hook for lot rent during rehab AND vacancy.

i've run the numbers many times.  I just don't see the multi-year net cash flow being worth the work, hassel or risk for owing lot rent during vacant periods.

All I ask is that you do a net operating income calc using as expenses:  theft of all appliances every 2 yrs, damage repair and an eviction every 2 yrs and 3 months a year vacant.   Or talk to the park owner for awhile till he's comfortable with you and get his experience with theft, vacancy, damage.  You may live in a perfect town where MH renters are model renters?  :)

I've found the net NOI, not the perfect scenario spread sheet NOI, is barely net positive after a few years.   This why park owners practically give away MHs for just one month's rent as "down" and they own it.  Because it's very hard to make money renting MHs.  Unless you are in states like MN, WI, etc where MHP renters pay, stay and don't do damage.  In the SE this is not the case unless you are very very good at tenant selection, which is more art than recipe.

Ronald Bourgeois · Answer

Speak with the Park Manger to see if they allow Investors to rent out units. Get it in writing.

Some Parks require you buy new units thru the park to maintain 'Park Integrity'  Check with the office to see if you can buy your own unit or if you have to go thru the park or if you are  limited to certain styles and manufacturers.

Before you invest in a new unit, think this thru.  Parks sell out and the new owner may not allow investor rental units.  Happened here in a town adjoining mine, the investors had one year to sell the property, move the Mobile Home out of the park or move in to the unit.

Check with your states online database for 'The State Attorneys Guide to Mobile Home/Park Ownership.'  Your state may have a different title, but it's worth the time and knowledge to read thru the current laws and guidelines for your state.

I did a lot of research on this matter several years ago when I was thinking of buying a park. The only reason I didn't buy a park is that no one in the family was interested in taking it over when I finally retire.

Best of luck,

-ron

Curt Smith · Answer

PS I see your in CA, a state short in housing.  Get to know a few local park managers to learn the ropes and the real statistics on length of stay, leaving before end of lease without notice, damage and theft.

FWIW "priced accordingly" is free in areas in the South.  Parks are happy to be rid of a poor shape home in exchange for lot rent being paid from day one.  You might go back and re-negotiate.  No more than $3k.  Surely you can get it for zero to $2k.  Or less than what you are paying is my point.

Andriy Boychuk · Answer

Shelby Pracht I am not clear about the statement "in order to have that space". Do you buy land in the existing mobile home park?

how big is the unit? # of bedroms #bathrooms? Lets say you have the same units but it in move in condition. How much you can sell it for?

Shelby Pracht · Answer

Thanks for all the great input. The deal ended up get bought from under my nose, but maybe it's for the best. I'll have to pick the new owners brain after a year or so and see how he's doing!

Curt Smith · Answer

Ronald just hit the reason why I suggested reading other "lonnie dealer" threads here.

But I'm impressed with the rents Shelby mentioned!  Wow.  But there in lies Ronald's trap.  I'd be shocked if those parks allow investors taking THEIR profit.  In very low rent parks lonnie dealers provide a service.

John Turner · Answer

Have a contractor go through it with you to give you an idea of costs before you buy. Put those numbers into your calculations.

That will determine your cost benefit and if it is worth it.

Shelby Pracht · Answer

Thanks for the input Curt. We're in a ski resort that has pretty high housing demand. Most of the homes in this park have sold for between 40-70k during the last 4 years and space rent is 760/mo. They rent from 1200-1600/month. This gentleman wants to sell his for 10k (and I was planning on offering a bit lower, 6 maybe) it just needs quite a bit of work. Compared to the sale and rent rates it sounds good, but I'm still not sure if putting a bunch of work into a mobile is a good idea.

Jeffrey H. · Answer

Most of the time it makes more sense to rehab the older unit than to start from scratch.

Keep in mind it will cost you 2K or more to move or demo the older home, and then you have to spend another 4-5K to move another home in, put in skirting, decking, etc.  Then do you have to do some rehab on the newer unit?

It's a lot of extra work to put a new home in there, and many times you will not see much of a difference in rent people will pay for how it looks on the outside.  The inside should be clean for both and generally the same in function.  Maybe the California market is different in this regard though - not sure.

When in doubt do a test advertisement for a newer unit and older unit to see which has more demand at what price point.  Then you can make you decision based on the estimates for the work from your mobile home repair contractor pool.

Ben Braddock · Answer

Also, I may be confused.  If you buy the MH are you saying that the lot is part of the deal?

You would also own the land?

Most MHP's you can not buys lots

Is There Value in an Empty MHP Lot?

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