Building a mobile home park from the ground up.

[Amy Brossette]

I’ve heard that you should never build a mobile home park from scratch, but I inherited some land in a prime school district. With no rental properties in the area. I already own A trailer park in the next city. But the initial cost of it could be upwards of $100,000. Just for all of the things the engineer wants to do and the ground prep work. They are saying I could get 22 trailers paying seven to $800 a month. How much is too much money to spend? And where do I get the money? Local bank? Or an investor?

[Curt Smith]

OMG!!!   Please start with your county planning, building, zoning and permitting office.   There has not been a new MHP built in the last 20 yrs.  I'm not kidding re 20 yrs.   

Counties hate parks.  The real estate taxes are based on raw land, yet the county has huge costs from kids in local schools, police dropping by several times a week, water and sewer.  

your chances of getting all the permits is zero.

The economics is also negative. Its cheaper to buy assets today still then build new. used self storage is a fractoin of ground up new, same with MF, same with even SFR. Each single wide 3/2 cheapest from Clayton is TruHome (cheap cheap, I would not buy TruHomes, we did 2, and they are flimsy) they are $25k + extras + hauling + setup + local utility costs of septic + power.

You will be shocked by the cost of putting in roads, even gravel roads, then the parking pads, septic, power, water.

This is a total guess would be $75k per pad all in ground up including the roads.  x 22 = $1.6M of cash cash.  Unless you have partners with this kind of cash, you have to front this yourself.

Assuming the county will give you the permits, but I'm 100% certain they won't, I'm going through this as an excersize.

800 home rent (the worst kind, y0ou really want tenants to own their own homes and you collect lot rent) x 22 x 0.5 (50% expense ratio which I feel is too low, 60% might be closer) = $105k NOI/yr so cap rate is

105k / 1.6M + cost of land say 100k = 6% cap.   Ok not as bad as I was guessing.   MHPs trade to day for 10% so again its cheaper by 4% to buy existing then build new.  I didn't not include all the debt service for that 1.6M of new debt...  

Just doesnb't pay unless extremely high rent areas like CA etc to build apartment buildings, MHPs etc etc.  Keep looking for existing parks forsale.   Good luck.

But congrats on thinking outside the box and about highest and best use.  :)   

I strongly suggest anyone interested in MHPs take frank and dave's mobilehomeuniversity.com boot camp.