Park owned homes vs Resident owned homes

[Michael Fortier]

I have been doing a lot of research into mobile homes and mobile home park investing lately. As I research I always see parks with a percentage of park owned homes. Is there a general thinking on which is better? I realize there is less maintenance on just the lots than there would be on a lot with a home owned by the park. What are the benefits and risks? Is there a general rule of what a good percentage is on POH vs just getting lot rent, or is 0% park owned a better strategy? 

[Curt Smith]

Adding to what great advice that has already been given.  When parks get put on the market it's rarely because they are perfect and make loads of cash.  One of the best reasons is that the current owner is old or fairly common has died and the widow has let the park go to heck.   These are almost always 100% POH parks.

If most of what's forsale are POH parks,,, guess what, learn how to make sane offers.  Once bought then how to clean up such a park and convert POH to TOW (tenant owned) is the business model.

The hard part (ignoring the huge problem of cleaning up such a park) is getting the seller to accept an offer calculated as:

Number of paying pads x 12 x $equiv lot rent from surrounding parks x 0.5 (50% expense ratio) / 0.1 (or higher) for 10% cap rate

Add in nominal value of the homes, $3k for old homes on up a bit.  

Most sellers will have an idiot broker who's caprated the whole home rent amount and it will take literally a year or more for the seller to realize your offer range is what they'll have to accept to sell.

Then as Jeff says, the bank's appraiser will validate your very low price through the financing process.