Purchasing Vacant Pads from a Park Owner

Mobile Home Park Investing
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Purchasing Vacant Pads from a Park Owner

Dustin M.
IL · Member since 2009 · 68 posts · 10 votes

Hi,

In one of the parks I'm doing Lonnie Deals, the park is at 40% vacancy.

I'm thinking of asking the park owner if he wants to owner finance empty pads in his park. I would be responsible for finding a home to put on the pad and once this is done the lot rent would go to me for the spot (I would likely do a Lonnie Deal on the pad so I would get two income streams here).

Anyone have any advice going into something like this? I was thinking of asking him if I could purchase one empty pad at a time and after a home is put onto it have him owner finance another empty pad to me until he is out of pads that are empty. Hopefully by the time I had all the empty spots filled I would have enough cash saved up to purchase the mobile home park from him.

Lot rent in the park is $250. I was thinking of asking him to owner finance 10K per pad with no money down at 5% with payments around 150 a month for six and a half years.

My other concern is factoring in how much I should pay in monthly expenses to keep the park running. If I do end up purchasing pads in the park I don't want the current owner to take advantage of me. I thought it would be fair to pay a percentage of the total spots I owned even if I haven't moved a home onto the pad yet. So if I owned 2% of the total pads in the park I would be responsible for 2% of the monthly bills for the park.

What do you guys think of my plan?

Dustin

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    16y

    Dustin, you're aleways thinking!

    Buying pads? Problem is that to do so would require a minor sunbdivision, some governmental approval and surveys to get a legal description for several pad to have title. Not very probable or cost efficient.

    But, if the park is an LLC, you could buy into the LLC and show you interest in the Operating Agreement. Some draw backs here as well. Say the owner would do such a thing, if someone gets hurt on any other area of the park, the LLC is at risk. There are many ways to limit such risks, insurance, but still, you may have to take on some risk and responsibilities that cover the LLC.

    I would suggest you appraoch the owner with an option to buy the entire park, with a sale price to be determined under and appraisal agreement in the future.

    Together with that, use a long term lease and sub let the pads. This will give you basically the same cash flow as paying a seller financed note. Also, see if you can have an option to lease pads as they become vacant.

    This way, you won't need a legal description for each pad and have the hassel of trying to title each pad. Good luck....

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  • Dustin M.
    OP
    IL · Member since 2009 · 68 posts · 10 votes
    16y

    Thanks for the quick reply.

    I'm not sure if I could get the owners to sign off on a long term option to purchase the mobile home park. I've expressed interest in purchasing the park some day in the future but I told them that it is going to be many years before I would have enough saved to purchase the park (it will sell for around 1,000,000). So I'm not sure if the park owners would be interested in something like this.

    In addition if I did do a long term lease option payment what happens if at the end of the long term lease I don't have enough money saved up to purchase the park(or can't get a bank loan to purchase it).

    Lets say the owners do agree to a long term lease option to purchase the park, is there a way I can structure the contract so my monthly payments eventually give me partial ownership of the park if for some reason I can't purchase the entire park say six years from now?

    Dustin

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