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Mobile Home Park Due Diligence Checklist!

John Vashon
3 min read

Due diligence done right can be the difference between a great investment and a loser that sucks an investor’s time, cash and enthusiasm.   The checklist below provides a new Mobile Home Park investor a comprehensive starting point or an experienced investor the opportunity to expand and improve their current due diligence process.  First, let’s cover the basics!

Due Diligence Basics

  • The purpose of due diligence is to lower risk and increase the probability of achieving the target ROI over the hold period of the investment.   The process starts when a buyer asks that first question and ends when a commitment is made to purchase, close of escrow or cancellation of the purchase agreement.
  • The process is something like a solving a puzzle with the goal of building a complete and accurate profile of the property.  This is accomplished by gathering, validating and analyzing data in the following 3 areas:
    • Financial
    • Physical
    • Locale
  • Each due diligence process is different based on the unique elements of the deal and features of the property.  The “key” elements of the transaction are explored first and usually, the most intensively.
  • The buyer should provide the seller a comprehensive disclosure statement and include a term in the purchase agreement that obligates the seller to return the document within 5 days of acceptance.
  • Professionals are hired to complete Phase 1, 2 & 3 reports that identify potential or existing environmental contamination and all other elements of elements that are difficult for the buyer to effectively evaluate.

Financial Checklist

  • 3 years profit & loss statements
  • Rent roll with space number, name of resident, move-in date, renter or owner occupied, number of occupants, monthly rent, additional charges, current balance due and any relevant notes about the resident
  • List of capital expenditures for the last 3 years
  • 3 years of tax returns
  • 12 months of bank statements
  • Current accounts receivable statement
  • List of park owned home including copies of “rent to own” or sales contracts
  • Copy of all current insurance policies, binders and premiums
  • Spreadsheet detailing who pays all utilities including water, sewer, gas, electric, trash, cable, etc…
  • For all utilities and charge backs, formulas, calculations and meter readings for the past 12 months
  • 3 years of utility bills
  • Property tax bills for the last 2-3 years
  • Current staffing list including position, wages, job descriptions
  • Copies of any contracts that will transfer to buyer including laundry, trash, phone, equipment, etc…
  • Dates and amounts of the last 3 rent increases
  • Signed rules and leases for each resident
  • Names and contact information of professional service providers including lawyers, accountants, engineers, insurance brokers, inspectors, appraisers, realtors/brokers, etc…

Physical Checklist

  • Spreadsheet for utilities that details age, composition, capacity, physical locations, etc…
  • Any drawings or maps of the park and infrastructure including lot sizes
  • Sewer plant or septic system repair and maintenance records
  • Water well tests and compliance records
  • Disclosure from seller of current or recent problems with infrastructure including buildings, water, sewer/septic, gas, electric, etc…
  • Names and contact information of contractors  including plumbers, tree surgeons, electricians, gas inspectors, septic companies, roto-rooter services, etc…

Locale Checklist

  • Profile local housing market:
    • “Stick-built” – current foreclosure rate, months of available inventory, median home price, average rent per month, vacancy rate
    • Apartments – average rent per month, vacancy rate, prevalence of move-in specials…
    • MHPs Comps –  average monthly charges (rent, utilities, etc…), vacancy rate, # of homes for sale, etc…
  • Profile local economy including population, major employers, unemployment rate and trends
  • Copies of city, county and state permits, licenses or certificates of occupancy
  • Check zoning for recent or pending changes to target property and adjacent parcels
  • Check for known environmental issues with target  property, adjacent parcels or in the community
  • Check for major development or construction projects in the community
  • Review existing surveys or environmental reports
  • Consider geographic factors including elevation, annual snow fall, rain fall, proximity to bodies of water, etc…
  • Disclosure from seller of current or recent lawsuits, regulatory or compliance issues, fines, fees, etc…

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.