Finding Mobile Home Parks for Investment

[Mark Davis]

All Cash talked about mobile home parks being cash cows. I was wondering how exactly to invest in a park. Where do I locate parks for sale?

Is it better to invest in the homes themself or in a park??

[N/A N/A]

Prepare yourself; I have a lot to say on this subject :D

To begin……Come on Loan guys, your current profession is blinding you from the fact that many mobile home parks are purchased with much less than 20% down through owner carried notes. Small to medium sized park owners are typically older gentleman that have been running or overseeing the managers of their respective parks for a long time. Many of them are tired of this responsibility and would love to have someone like them come and take the park off their hands. Furthermore, some of these same owners prefer doing business the old fashioned way (without bankers / real estate brokers breathing down their neck and inundating them with paperwork). In other words, a large percentage of mobile home park owners would rather take some initial financial consideration, make a nice profit each month off the interest on their note and not worry about the day to day issues of running a park. Additionally, many of these owners do not want to deal with a several hundred thousand to million dollar tax problem if they sell the park outright. Sure they could 1031 it into something bigger; but then they’re in the same boat as before.

Sorry loan officers but investors should ALWAYS, ALWAYS shoot for owner financing in your mobile home park purchases.

Marks, In response to your initial post, as to whether it is better to invest in mobile homes on in mobile home parks, I would say the latter.

Investing in mobile home parks is an absolutely beautiful thing. Not only is it a long term land play, but you have NUMEROUS ways to make money through your park. As opposed to investing in single family homes it is actually very difficult to NOT achieve positive cash flow each month. This is due to the following reasons:

1. The parks are usually in a less than favorable part of town. Therefore the land is cheap and you will be spreading that cost over numerous mobile homes.

2. Provided you purchased the right mobile home park, there will be vacancies and their will be a few spaces for you to bring in extra mobile homes. (Yes, that’s right….you want at least half the park to be vacant when you purchase the property as that fact will kill the sellers price and ensure that you end up buying a screaming deal.) You’re healthy, sharp and full of energy so you’ll improve the quality of the park, raise rents and maximize your rent roll. By the way this will immediately increase the value of your mobile home park through cap rate valuation. Net Operating Income (not including cost of financing) / cap rate.

Example

30 Space Park, $300 a month Rent Roll (50% Vacant) = $54,000 yearly rent

$54,000 – 16,200 (30% of rent goes towards Operating Expenses) = $38,000

$38,000 (N.O.I.) / 9.0 % (cap rate) = $422,222 (Your Purchase Price)

Your up side:

30 Space Park, 100% Occupancy, $320 a month rent roll = $115,200 yearly rent

$115,200 - $34,560 (30% park operating expenses) = $80,640

$80,640 (N.O.I.) / 9.0% (cap rate) = $896,000 ...I would sell at this point :)

3. If cash flow is low you can add additional revenue by putting in a coin operated laundry mats, adding vending machines, arcade games, day care services, etc.
4. Lastly, you should have purchased a park that came with owner rights on the mobile homes themselves. This will enable you to be extremely creative with how you fill your park with people. Far and away the best tactic is to Lease option your mobile homes instead of renting them. Home ownership is the American dream so when you advertise “Own your own home, $3000 down, bad low monthly payments – Bad credit OK, call Boca Vista Mobile Home Park” Your phone will ring off the hook, trust me. From there you take their down payment and have them sign your lease option paperwork that details the term of their loan with you. So why sell them one of your mobile homes….isn’t that an asset to the park you ask? Yes, but:

A. Now you have someone in your park that has pride of ownership and will most likely take better care of the mobile home than most people would.
B. Because they technically own the rights to the mobile home, you are not responsible for costly maintenance.
C. Due to the interest on his loan, this person will pay you more each month than anyone renting a mobile home in the area.
D. If he/she gets promoted or saves up enough cash to pay the remaining balance (this almost NEVER happens by the way) then you make a substantial amount of money because due to serious demand issues, you can sell these homes for much more than they are worth.
E. Most of the time, the person will be late on a payment or two and will flee during the middle of the night. In that case, the property is 100% yours again, you’ve pocketed the $2000 option payment and you start the process over again.

Anyways, I think I might have gone overboard with this post. Its just that I sometimes can’t believe why more people don’t purchase these cash havens. Anyways if you’ve read this far, here are some very useful links. The first is a mobile home park investing website that has some insightful articles and offers the investment course that got me started in this complicated but lucrative business. The second website is a directory and marketplace for all things related to the mobile home industry. You can find mobile home parks for sale on this website. The final website is the largest commercial property listing service.

http://www.mobilehomeparkprofits.com

http://www.mobilehomeparkstore.com

http://www.loopnet.com

Good luck with your investments !