Infill of Mobile Homes to an MHP

[Dominick Dahmen]

Hey all,

So in running the numbers on MHPs online, I see plenty that have like 94 or 95% occupancy. But they still say there is "value add" by i filling say 7 homes or lots. If it's that simple, and the market is good, why haven't they done it?

Are they lazy? Or just really ready to sell?

[Jack Martin]

As @Frank Rolfe mentioned, it's a lot of work to fill vacant spaces and they will not fill up if you simply wait for a future resident to bring a home into the park.  Just because the current owner has not filled them, doesn't mean it can't be done.  It could very well be the case that they just don't have the energy to do it. 

However, before you underwrite that value-add income, make sure you do a proper demand study so you know the demand exists.  What Frank is eluding to is to advertise a home for sale as a "test ad".  The goal of a test ad is simply to find out how much interest there is in the market for the homes you will be selling once you purchase the park. Place ads on every platform available where home buyers could be looking for an inexpensive home so you can perform a true test of the market demand.  You may consider placing signs in the area to attract calls from street traffic as well.  

While you are running test ads, it is also smart to see what your competition will be, so call the parks within 5-10 miles that are similar parks and find out:

• What their current lot rent is and what else is included/excluded?
• Are there any rentals in the park and how much those rent for?
• Do they have any homes for sale in the park and what the details are, and how many homes have sold recently?
• Do they finance? How much do they require down? What kind of credit do they require?
• Are any vacant spaces in the park and what incentives would they offer if you brought your own home into the park? 

Also, make sure to call the apartments in the area and find out:

• Is the 2 bedroom apartment rent at least double the lot rent at the mobile home park?
• How many vacant units there are to choose from, and what incentives are being offered to new residents?

You should always consider apartments as competition, because if it costs more to make payments on the mobile home plus pay the lot rent, prospective residents could choose to rent an apartment instead. 

From those calls, you will have learned what your competition is related to lot rent, the sale of homes, how many POH they have, and what incentives you may have to offer as you sell homes.  This will allow you to properly underwrite the park and understand if the value-add components are realistic or not. 

Remember, filling vacant spaces is all about market demand.  Take the time to do this right and you will be glad you did.

All the best,

Jack