Newish Investor, Looking to start Mobile Home Park

[Gordon Park]

Hi all,

I am new to BP. I would love to get feedback as I am a newish investor. I have a couple of real estate deals with multi-unit affordable housing.  However, I am looking to start a mobile home park from the ground up which I have not done before.  I am looking to provide rent to own mobile homes.  I am in the north texas area and have the land under contract.

I read some of the posts about the challenges and some posts going as far as to say it is a terrible idea.  I'm not necessarily convinced i should change plans.

Thanks for additional advice as I engage design engineers, contractors, and mobile home wholesalers.

Thanks

[Matt P.]

Been an owner operator for 25+ years. Let me cure you of one of the primary mistakes folks who get into the MHP business make; Renting out the mobile homes (I know you said rent to own, I'll address that later). On it's face, your looking at "double the income" so to speak, and that increases the CAP rate which will increase the value of your park. This is in direct violation of the philosophy of owning and operating MHP's which is "owning the dirt, and you can't hurt the dirt". MHP's have lower operating costs because you do not have to deal with the problems of a rental unit. Your just renting dirt. And when it comes time to sell or refinance your MHP, banks and buyers, including myself will look at any and all park owned homes as a huge negative and will discount the value of your park because of it.

Now, with the above being said, you've got to fill vacant spaces. First stop is your local dealer whom you offer him the opportunity to park one of his models on the property and pay you rent. You'd be surprised at how many of these dealers will do that. 

Or, you buy a home, put it on the lot and then SELL, not rent to someone. But what if most folks don't have the $10 to $20k to pay cash for a home? Then you sell it to them on a note, and the note is in the name of another LLC you start. You buy a cheap mobile home for let's say $6K, put $1500 into fixing it up and sell it to someone on an owner carry note for $18,000 with $1500 down and 10% interest over 8-10 years. You then sell that note to a note buyer at a discount and collect maybe $12,000 at closing and now the note is no longer yours to manage, and you put $6k profit in your pocket and if the buyer quits paying not your problem as the note buyer is now on the hook for your space rent.

Never have any park owned homes. Ever. 

Hope this helps!