Cost to Build a Mobile Home Park

[Luis Sanchez Rodriguez]

Hey BP folks,

Is there anyone here who has the experience of building a mobile home park from the ground up?

I'm working on a project that involves building such a park and I wanted get an idea of how much are the startup costs.

Thank you guys.
Looking forward to your feedback. 

[Frank Rolfe]

Yes, I have built a mobile home park from scratch.

It is a very scary and risk-prone process. Here are some of my observations:

1) There are no lenders for these projects so you have to do it with cash typically and then refinance. So it's extremely capital intensive and there is no liquidity option.

2) You will have to bring in a home to every vacant lot to fill it in 99.9% of all U.S. markets. If you can get in with 21st Mortgage, then they will advance the capital for that, but otherwise you're looking at $40,000 to $50,000 of additional capital PER SPACE just to get the homes on there.

3) Most of the good markets in the U.S. will not allow new mobile home park construction, so if you can actually build in your market you have to think twice if it's really worth it, as the fact there's no possible supply of new parks is what drives the value in those markets that don't allow it. Kind of the old W.C. Fields quote "I would never want to join a club that would allow me as a member".

4) If you don't have access to city water and sewer, then don't do it. The cost of private utilities is gigantic (like $1 million for a sewage packaging plant) and parks without city utilities are a lot less appealing to future buyers and banks.

5) For these reasons, there are only around 10 parks built in the U.S. PER YEAR. That's an incredibly small number.

6) If you run the numbers, you are typically better off buying an existing park than trying to build a new one. Existing parks have revenues and net incomes already in place and have liquidity from day one.

If, however, despite all these issues you still want to build one, here are a few more things to watch out for:

1) Don't get into a "tap fee" trap. Some cities charge a "tap fee" to connect to their water and sewer systems of between $5,000 and $25,000 PER LOT. They don't tell you about this, of course, until you have finished building your mobile home park.

2) Run as test ad to make sure that the demand for mobile homes in this area is as strong as your think. A good test ad response is about 30 to 40 calls per 10 days.

3) Make sure you understand the cost and difficulty of filling your vacant lots with new homes. Home prices have gone up $10,000 since Covid began and the turn-around delivery time is like over 6 months now.

4) Most of the successful new parks built are situations where people find land in good markets that is already zoned for mobile home park but nobody ever noticed, and with city water and sewer right on the frontage. Be very wary of building parks out in the country in the middle of nowhere -- there is much more to a park than just getting a permit to build one.

5) Some of the parks people want to build would work out better as RV parks than mobile home parks. RV parks have less construction cost and utility needs and you can fill the lots without bringing homes in.