Build a new one or buy an old one?

Question

Greetings all!

Question: Is it better to buy an older MH park or build a new one?

Situation: I have some 60 acres of land in upstate SC that I want to be able to use to create income. Problem is, it's wooded with no city utility access, no sewer, no water. I've thought about setting up a MH park there, (free land after all) but I'm wondering how much the setup would run and whether or not it would be worth the investment.

Me: Never had anything to do with MH parks, but I do own a couple of old MH's that I have fixed up and rented out on my own property. Pays my mortgage every month. :D I am very intrigued by the idea of MH park ownership, however, and no, I don't care at all about it's lack of sex appeal.

So....any advice/thoughts/concerns/hints?

Thanks in advance!

Jon Holdman · Answer

The first set of questions are the same for any sort of development:

1) Is there demand? If you build the new spaces, is there enough demand to fill them?
2) Can you get the necessary permits to build?
3) Can you supply utilities?
4) Can you fund building this facility and holding onto it while it fills.

I'm not intrigued by MH parks or any other sort of real estate.  I just want an investment that makes money.  Don't get enamored with having a MH park.  Convince yourself this will be profitable.  Unless you have a lot of cash and are willing to blow it on what could be an expensive hobby, first come up with a business plan that shows strong returns.

Jim Johnson · Answer

This for me is a pretty simple answer, though the explanation is more complex... the answer is in almost every instance you are money way ahead to buy an existing park. There are very few areas where developing makes sense, like some parts of California, some parts of Arizona, some parts of Florida, and a few other parts of the country that might have a demand for this type of housing. For many reasons development is not feasible in this market. One is the cost of development. If you are really, really sharp you might have hard costs at $10,000 per pad. But that is all money spent up front with no income to back up the investment. So you will carry that debt for a good chunk of time. The real killer is filling the park. You will have to be proactive in filling the pad yourself so you better hang on because a new park will probably not let you pull in older homes. Newer homes will run you $20,000 on the low end, and if you get into double-wides etc on the wholesale side your $28,000 and up. Now you need a new batch of cash to pull in homes, at about 2 or 3 times the price of developing the lots- and your not including the land cost yet. Once you pull in the homes, you need to sell hem. Almost no banks loan on mobile homes, so you will probably have to carry the financing. So per lot your looking at maybe $30,000 from the investment side per pad. 
          On the flip side, parks that are fully functional can be purchased for as little as $5,000 per pad and up. The per pad price is effect by many factors, and going over them would make this a book not a post... but the short answer is...  in this market you really need to by buying parks that exist and have functional income and homes pulled into he pads. 
          
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Jim Johnson · Answer

There are very good buys in the market right now. The challenge is sniffing them out, knowing how to evaluate them, performing good due diligence on the park, and getting comfortable with the operations side... The good news is all of the objects in your way to success can probably be overcome through 3rd parties, education or a mix of both...

Just Don · Answer

Probably the LARGEST barrier to build a new park is the  NIMBY concept.

Plus local rules and regs.

Also in YOUR instance that water and sewer costs and ongoing operating costs and ongoing  operating regs,,a triple nightmare.

BEFORE doing anything,check into those.

Septic systems and wells are NOT very good options and ongoing maintance astronomical.

IF I were to build anything,,,city water and sewer ONLY!!!

Just want to throw out another thought,,,in MY part of the country,,,mobile home living was considered economy and what people did and put up with,,,todays kids,(upcoming generations) want big stick built houses and WONT settle for mobiles any more.

Here vacancy used to be 0% and a LONG waiting list to get anywhere nice,,now you have your pick of lots,and lots of boarded up houses on other lots to look at!!

I guess its called a sign of the times.  general public perceives mobile homes as sub par,,since the low income can NOW go rent a apartment and based on income,not pay much.  NEVER used to be those programs in old days.

Research YOUR market thouroughly and note change in housing trends in last 10-20 years!!

HERE the government enities have closed DOWN 3 BIG courts 'for our size town',,and remaining courts are half empty.  The worm has turned on mobiles in COLD weather climates!!

Vikram C. · Answer

Mike, that's why I haven't bought anything yet.  The numbers just haven't looked that great.  I'll need the help of experienced people like you and Jim to figure this one out, I think.  $10K per space for something that can be rented for $250 or more with expenses 30% or less sounds pretty good to me.  Especially if there's a little vacancy that I can in-fill and if I can bring expenses down further and rents up a bit.  Lots of small improvements = one big improvement.  I just need to find the right property.

Gigi Blanton · Answer

Good advice all - thank you for your input!

Vikram C. · Answer

I haave been looking for MH parks to buy for the past few weeks.  I haven't found any that I wanted to buy but it looks like pricing can start as low as $20,000 per lot.  I think your decision can be analyzed by comparing the cost of construction per lot with the lot rent that you can expect in that area.

Build a new one or buy an old one?

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