@Mike Zhou
- Is the park located in a metro area with 75k+ population? If not, you may have a hard time filling the vacancies.
- To gain an understanding of the demand for your product in the area, run test ads for home rentals and lot rentals at your proforma rental rates. Post generic ads on Craigslist, Facebook Marketplace, and the local newspaper describing your park, the homes, and the general location. Provide a Grasshopper or Burner number and monitor the incoming calls. Aim for 20 calls per week as a measure of strong demand.
- Talk to local MH dealers and gain an understanding of the sales volume for new and used homes in the area. Place flyers in the dealerships for your park. Typically, dealers get paid when they deliver and install homes on the site. Therefore, placing ads in their dealership should be welcomed. In my experience, they are always seeking parks with vacancies into which they can deliver new homes.
- You can fill empty lots with used homes or new homes. You can find used homes on craigslist or FB marketplace. You can also find them at local MH dealerships. Partnering with MH investors to have them place their MH rentals in your park is also an option, though I would be careful with this and limit the number of investor homes in your park to 10% from a single investor.
- On the surface, 17 occupied lots for $250k doesn’t seem crazy but there are many other factors to evaluate, such as:
—> Are lot rents $200+/month?
—> How many park owned homes? What age and condition are they?
—> Is the park serviced by municipal utilities?
—> In what condition are the roads?
—> What are the lot rents in the surrounding area? Are other parks in the area full or do they have high vacancy such as the park under consideration?
—> How to you plan to finance this park? banks won’t be too interested given the high vacancy. I suggest asking the seller to carry a note while you fill the vacant lots. You should be able to refi into a traditional bank loan once you fill the park.
- I suggest re-examining the cap rate to ensure that the NOI is based on lot rents only. If home rent is included in the stated cap rate of 14%, then it's inflated. Capitalize lot rents only and add a shell value for the park owned homes to get a sense of the park's estimated market value.
- To fill vacancies, advertise daily on Craigslist, Facebook Marketplace, the local newspaper, and in dealerships. Offer move-in incentives, such as subsidized moving and installation incentives and / or 2-3 months’ free lot rent. Network with mobile home investors and have them bring their rentals into your park. Offer s referral bonus to residents who refer friends/family into the park. If you have decent traffic flow, place flags and new signs highlighting your park. Setup a website, Facebook page, Insta account and Zumper account for your park. Register the park on Google Maps / Google My Business. Explore all avenues to raise awareness about your park and the fact that vacant lots exist.
I have neither heard of nor used CCI Investments. They may be solid operators and advisors but I would caution you about paying for the services of a firm like CCI for a park this small. The fees associated with their services may burden the financials on a small park like this unless there is significant upside in the pro-forms (pushing rents, expanding # of lots, and filling vacant lots). Instead of employing a third party, you may want to consider partnering with an experienced operator as a JV partnership on this deal. If you aspire to own and operate MHP's, this may be your best way to learn while "on-the-job". It will require giving up some equity in the project but you may gain a richer experience which will serve you well in the future.
There is also a ton of free educational info available to help close your knowledge gap. Check out the podcasts from Jefferson Lilly, Frank Rolfe, Ryan Narus and Kevin Bupp. There is a ton of info in their respective podcasts about “the first 90-days”, filling vacancies, and advertising for new residents.
Finally, feel free to reach out to me if you have operational questions. We focus on moderate/heavy turnaround MHP’s and have a fair amount of experience resolving 20%-50% vacancy issues and executing park expansions and major infill projects.
