Stumbling into our first mobile home park deal.

[Chris Phillippi]

Investment Info:

Mobile home buy & hold investment.

Purchase price: $1,050,000
Cash invested: $100,000

This is an old school trailer park with 58 pads that are a mix of rv pads, single wides, two double wides, and one single family home. There were two open spaces when we bought it. We currently have no vacancies, although occasionally an RV moves out. Demand is strong, and we get a handful of inquiries each month. It's on city utilities, and in a great location. Zoning is waterfront mixed use.

What made you interested in investing in this type of deal?

I had recently read the Millionaire Next Door, where they specifically mention mobile home parks as a vehicle to create wealth. My job with my family's tree fruit business was not going well. The recession was still in full swing. I was training as a real estate appraiser at the time, and finding it to be fun but still work. We had zero equity in our home. I was pretty much interested in any type of deal, but I wasn't actively looking.

How did you find this deal and how did you negotiate it?

My works in Physical Therapy, and she had made a connection with one of her patients. One day she came home and said, "One of my patients has a mobile home park she wants to sell and she was wondering if we knew anyone who might be interested." I was like, "I think we're interested." We got to know the owners, looked at the park and its numbers, then made an offer that was lower than their asking. They came back halfway. I came a back a bit lower. They held firm. We accepted.

How did you finance this deal?

Seller Financing with $100,000 down (just under 10%). 25 year amortization with a 10 year balloon and 6.5% interest. We borrowed $75,000 from my wife's parents, and brought my mom in with $25,000 for a 25% stake. Three years later we were able to go to a bank and get a 15 year amortization, 10 year loan with 5 year interest adjustment, at 4.5% interest.

How did you add value to the deal?

The rents were low, and this place was really not set up to run itself. We did a little road work (gravel roads), upgraded the lift station, got rid of the open dumpsters, filled the two vacancies, and raised the rent consistently.

What was the outcome?

We still own the property. In 2018 we refinanced again, recouped our initial investment, bought an RV and took our kids on the road for a year.

Lessons learned? Challenges?

I learned that we got really lucky getting into mobile home parks at the time that we did. This has been so much easier than any other business or job I've been involved with.

I learned that the negative stigma surrounding mobile home parks can create a really good opportunity for those who are willing to look past it.