Mobile Home Park Strategy

Josh Heeb · 2019-04-30T12:53:21-07:00

Whats up BP! I found a couple mobile home parks close to me that are for sale. One is 90%+ occupied and nice little community. The other is particularly interesting to me and I want to hear some opinions about this strategy. The second one is in a small rural community. It has 49 pads, but only 5 residents. 4 are renting the lot only and the other house is owned by the park owner and rented out to the tenant. I know that's less than 10% occupied, but what makes it interesting is that only 7 pads are actually vacant. 10 of the houses have been abandoned and and 7 are owned by the park but unoccupied. Here is my question. Is it worth purchasing this property and rehabbing the homes that are unoccupied? What is the process to get the title for the abandoned homes? Does it make sense to purchase a distressed mobile home park and try to flip it to increase occupancy?

Greg Dickerson

Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes

7y

@Josh Heeb it all depends on the purchase price, condition of the units, the park itself, the infrastructure, utilities etc. These can be very good and can turn a nice profit. You need to talk to some mobile home movers and contractors in the area to assess the condition of the existing units and the costs to repair. If some of the units are habitable you should owner finance in stead of rent. You can also bring in units to owner finance out. The best cashflow is on lot rent not park owned homes. They can be a major headache to manage.

Mobile homes are personal property and are usually titled through the DMV in most states so check with them to find out the process of claiming title to abandoned units.

There is a lot of great info on mobile home park store.

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Josh HeebPro Member

OP

Member since 2018 · 12 posts · 6 votes

7y

@Greg Dickerson that’s exactly what I was thinking, rehab on the vacant homes and lease option to new tenants. The whole park needs a facelift to have any chance at filling up. I’m trying to figure out how to value the purchase and if it’s worth pursuing I guess. I would essentially be purchasing 17 vacant flips for a really cheap price. I am trying to wrap my head around how I would get new tenants interested so the park would fill up.

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Greg Dickerson

Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes

7y

@Josh Heeb you want to get the trailers for free and owner finance not lease purchase.

It would need to be a sweet deal to make sense. Is the property owner willing to finance you?

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Josh HeebPro Member

OP

Member since 2018 · 12 posts · 6 votes

7y

@Greg Dickerson I haven’t talked with the owner yet. I’m going to get ahold of the realtor in the next day or two and that is something I will ask. How do you value a park that is almost vacant if you call the trailers $0 value?

Thanks for the responses, this is extremely helpful!

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Greg Dickerson

Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes

7y

@Josh Heeb it would be easier to talk offline about deal to get an idea of value. Sounds like its not worth much at all in present condition but price will be subject to location and market values for land etc. It's going to be a function of how much you need to spend and how much the lots will rent for. You do not want to use the park owned units in the calculation just lot rent - expenses.

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Josh HeebPro Member

OP

Member since 2018 · 12 posts · 6 votes

7y

@Greg Dickerson Ok thank you. I will reach out to some local realtors and contractors to dig up some better info and start there.

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Jack Martin

Specialist · Scottsdale, AZ · Member since 2014 · 626 posts · 700 votes

7y

@Josh Heeb Regarding the second park, all those questions you asked have pretty straightforward answers. However, from what you shared, the park is in a small rural community, so that usually points to a lack of demand. Before you dig into those answers and the strategy you should consider for the park, it will be critical to determine what is the cause for the park to be 90% vacant. If it is simply due to the prior owner being negligent, then the park might be a great opportunity for you. However, if it is due to it's location and reflective of a lack of demand in the market, then you will want to consider passing on that one.

On every park we acquire, we do a thorough market study (ourselves) to determine market demand. DEMAND is the foundation of your pro forma, so don't shortcut the process. It is not that difficult and only takes about a week to complete if you are diligent.

Take these simple steps and you will uncover the reality about demand for that location:

Start with the apartments in the area. Call them and ask how much a 2 bedroom apartment is? It should be at least double the lot rent at a mobile home park in the same neighborhood. Then ask how many vacant units there are to choose from? If you find that the apartments have a low vacancy, that is a good sign. If you find high vacancy, that is another red flag for the market and you should be cautious. You should always consider apartments as an option for your prospective tenant, because if if it costs them more to make payments on the mobile home plus pay the lot rent, they might just rent an apartment instead. Most people miss this little nugget, but it is a quick way to determine the lack of demand and where lot rent should be in the market.

Next, call the parks within 5-10 miles that are similar parks. Ask them what their current lot rent is and what else is included/excluded? Ask if they have any rentals in the park and how much those rent for? Ask them if 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? Ask them if there are any vacant spaces in the park and what incentives would they offer if you brought your own home into the park? 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.

Next, you can advertise a home for sale yourself as a "test ad". Place ads on every platform you can where home buyers could be looking for an inexpensive home. The goal of these test ads are simply to find out how much interest there is in the market for the homes you will be selling once you purchase the park. Make sure to advertise in all the available channels you can find so you can perform a true test. (craigslist, FSBO, zillow, etc. as well as placing signs on the street corners in the area) You should be receiving a high volume of calls (I like to see at least 20 calls a week) if you expect to fill a high amount of vacancy at a park. Any less than that could be another red flag.

Take the time to do this right and you will be glad you did.

If you get positive signs from all those efforts, then it's possible the previous owner was simply neglecting the park and you could have a good opportunity on your hands. Remember, filling vacant spaces is all about market demand. Make sure it is there or you'll end up wishing you had never bought the park.

All the best,

Jack

1 Reply

Josh HeebPro Member

OP

Member since 2018 · 12 posts · 6 votes

7y

Jack,

I do know that the park has been losing money and declining for a while now. The owner is a widow and her husband was the one that really ran the operation before.

Everything else you mentioned makes sense. These are the suggestions I was looking for. I am not sure what the demand could be in this area. I know there is another park 20 miles away that is probably 90% occupied. That one is in another small town. The realtor that has it listed is telling me rental homes in this community are not lasting very long. I think with some basic maintenance on the landscaping and cleaning up the vacant/abandoned homes, it would really change the property, but the points you made about market demand is what concerns me.

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