Turning around a Mobile Home park.

[Clint Looper]

So I just got a mobile home park under contract. The agreement is well below the advertised sale price and puts the park at a 10 cap. The park is only at a 30% occupancy rate and the owner isn't running it well and doesn't have the funds to turn it around. I could wholesale this place but I'm a little more interested in renovating the park. It looks like there is a lot of upside potential. Buying the place at a 10 cap when it has room for 70% increased occupancy seems like it would be way better to renovate it. Is anyone experienced with investing in distressed mobile home parks? Thanks. - Clint

[Aaron R.]

@Clint Looper I bought a park that was 42% occupied this past March. This park came with about 20 park owned vacant homes, most of which required significant rehab work to make them habitable. Some we just had to scrap. We are now at 65% and will probably be at 90% or greater by March of next year. Word of caution is that you need to have plenty of cash available and need to locate an onsite manager/maintenance man that is willing to work hard for you. Fixing up old mobile homes is a can of worms and can get expensive compared to the sales price of the home. If a home needs a lot of work or we move a home into the park we will lose money on the sale of that home a majority of the time. However this is fine because our intention is to raise the value of the park by bringing the occupancy up. I've seen a lot of park owners let their park's occupancy drop or remain stagnant because they don't understand the value of filling spaces even if it costs them money. 

The other thing you need to understand is the condition of the infrastructure that you will own. That can cost you a significant amount of cash. When maintenance is deferred things like electrical pedestals, water lines, gas lines etc start going bad and need repair/replacement.