What # pads makes sense for 1st MHP?

Question

What size MHP makes sense starting out in MHP investing?  I want to be able to do it mostly on my own before scaling and bringing in a partner. I’m sure there’s a number that wouldn’t be worth it. But I see more experienced investors seeking 60+. Would it be a waste of time to start around 15-30 and trade up?

Jack Martin · Answer

@Courtney Johnson, any experienced mobile home park owner will tell you larger parks make more sense, including me.  However, like @Sam Fackrell mentioned above, most got started with smaller parks.  The first handful of parks I purchased were all smaller than 50 spaces and I don't regret owning any of them.  Through those parks, I learned many of the important lessons that we leverage in our business today, and they were all profitable ventures as well.  Regardless of size, what's most important is to buy it right.  If you do that, you'll have the freedom to sell it at any point along the way, AND you can learn all the lessons the park has to offer before you decide to trade up or keep it.

Scott Schaar · Answer

@Courtney Johnson this is a good question . I just recently bought my first one . It has 22 pads and I’ve got permits to extend to 27 . It’s a simple one, city water and sewer . Underground electric all direct billed to residents . This park was just mis managed no advertising of any kind . No actual structure or signed lease were in effect when I took over . It’s been a satisfying project to see turn around .

As far as partners go though . I took one on for this, only to keep more of my capital to keep investing in other deals . Plus I wanted to get my partner in on this one so when we go to tackle the next (hopefully) bigger one we’re both more experienced . Plus our partnership allows me to still run the park rehab how I saw fit . Much like how I do SFH .

If you haven’t read it yet . Go buy yourself the Due Diligence Manual from MHU best money I’ve spent .

Mike G. · Answer

@Courtney Johnson

all great comments from everyone here, i would say that starting out the number of pads is an arbitrary number in that its a relative to the deal and the numbers behind each individual park. What makes sense for one investor may not make sense for another. Everyone has different business models and different exit strategies.

If you want a small park and feel comfortable with that, then go get a small park, get your feet wet, make your mistakes and learn and grow from there.

Jason Ray Richardson · Answer

My suggestion would be to start small and get your feet wet. Starting small allows you to make mistakes with less zeros on the end. That's how I started, I bought a park with 19 spaces, mostly tenant owned homes. Maybe even buying a small park in an area where in the future you might could purchase another park so that you still the benefits of scale that bigger parks bring.

Brian Corbett · Answer

Hey @Courtney Johnson!!  Glad to see you getting involved.  I too would be interested in MHP investing in the right situation.

Chris Ebert · Answer

@Courtney Johnson, while this might sound obvious, I think the short answer is whatever size investment you feel comfortable putting at risk that yields your targeted return. Your potential return on an investment is determined by many factors, one of which is economies of scale. For example, on a 10-unit park, can you compensate a manager enough to make it worth his/her time and effort? I am a firm believer in starting small to get your feet wet, gain experience, and not risk more capital than you are comfortable losing. I discovered quickly that I do not like park-owned homes. Had I purchased a 50+ unit park vs. a 12 unit park, with all park-owned homes, it would have been a nightmare. Feel free to shoot me a msg if you have any questions. Good luck with the process!

Celeste Fackrell · Answer

Courtney,

Although I don't think most would agree, I started with a very small park; 8 pads, 6 homes.  What was appealing to me was that my park had Tenant Owned Homes, Park Owned Homes, empty pads, some small infrastructure issues, some good tenants and some bad.  It seemed to have a lot of the same that a large park would have.  I am a long-distance landlord, and knew that I would be as I searched for parks in the future.

I test drove everything.  Remove and replace, remodels, new rules and new leases, cleaning up the park, finding a manager,etc.  I learned a LOT with very little Capital involved.  It has been a great training ground and I am now scaling up on my next one(s). The plus side is, I can now keep my little park as it is VERY easy to own with the right Manager in place, or I can potentially sell it for at least twice what I paid for it.  For now, as it put an extra $1000+ in my pocket every month, I'm holding on to it.

I don't think there is a minimum range.  This park was comfortable to me.  Find your comfort level.

BTW, I know of a nice little park in NC that I evaluated but passed on for non-park related reasons.  If you're interested, and its still available, I'll be more than happy to pass on my information to you.

Account Closed · Answer

@Courtney Johnson That will depend on you, your risk tolerance, available capital , partners, available time, upside of the deal, future goals etc, market

You have to weight the specific situation. Can you buy a 10 space park local to you, all tenant owned homes , upside in rents, city utilities, at a reasonable valuation? Will you buy a 30 space park, all park owned homes, private utilities thats a 3 hour drive away?

As was mentioned on here, use the MHU diligence guide to walk through the purchase.  Do the bootcamp if you can . I personally think from watching the market, its getting tricker to buy larger deals at reasonable valuations unless you are able to get the one at a reasonable valuation or upside etc.

Smaller deals i feel are more bountiful, while they may not trade at as low of a cap rate, it can be a great spot to start. Especially if it works out and then in 5 years you can say you have your 60 space park and propelled your RE investing career.   I would rather take a great 20 space park rather than an average 80 space.  That being said, id rather take a great 80 versus an average 20.  I try to find the deal moreso and then pursue that but you just have to account for ability raising capital, patterning, your capacity etc.

I think what @Sam Fackrell is gold.  Not something you will hear often but he said sell twice for what he paid for it, that is huge when you go to factor a deal.  Might not be a billion dollars but on a return basis numbers like that you typically can't pull in SFH ( depending on what he put into the deals ) .

I also like @Scott Schaar s deal.  It sounds like a real solid deal with upside that he can learn a lot on .  I would take that any day of the week ! Scott, i looked at a couple real small parks in Evansville, they were dirt cheap you can still probably get a hold of the owner if he didn't sell them. I just didn't like the market but if i was local would probably buy them.  At the time was too much of a distance for me with too little upside but i think there are some deals in that area of the state as well if you know your market and understand where it may be going.

Courtney Johnson · Answer

@C.K. Ebert thanks. I may reach out when I find a park. I would like as minimal park owned homes as possible. My dad has rented out mobile homes the last 20yrs and shew, not a headache I’d like to take on.

Courtney Johnson · Answer

@Sam Fackrell hey I’d love the info on the park if it’s more eastern NC not mountains. I think I’d feel good smaller. Many smaller parks locally that I think could be turned around and a good learning experience. You can message me the info here. Or I can message you my email. It won’t allow it on the post.

What # pads makes sense for 1st MHP?

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