Mobile Homes

7 Paths for Newbies to Start Investing in Mobile Home Parks

Expertise: Personal Development, Commercial Real Estate, Real Estate News & Commentary, Landlording & Rental Properties
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BiggerPockets blogger Bryce Robertson has written two recent detailed and powerful posts about the unexpected power and profitability of this asset class. Robertson practices what he preaches and has made his way from a newcomer in the U.S. to financial freedom in a relatively short time.

I’ve written two articles on the power, the profitability, and the downside risk protection of mobile home park investing, as well. First, I wrote on several painful lessons I learned in my early attempts at investing in mobile homes.

Then I wrote about eight powerful reasons I love investing in mobile home parks. And this article resulted in one of the most substantial outpourings of messages I’ve ever received on BiggerPockets.

The most common responses surrounded one question: “How do I get started?”

You asked for it, so here goes.

I’m speaking to a large audience. Many of you are in different places. So rather than giving you steps to follow, I think it would be more valuable for me to give you seven different paths you can take to achieve success in this profitable investing arena. You can skim the following and land on your areas of greatest interest.

Path 1: Climb the Ladder

Mans Hand Reaching For Red Ladder Leading To A Blue Sky

“Don’t despise the day of small beginnings.” If you’re just starting out, a viable path may be to start out small and climb the ladder of success. Starting with a small park has many advantages including:

  • Less acquisition competition with larger players
  • Smaller down payment and loan requirements
  • You’re more likely to get owner financing from a tiny seller
  • The chance to cut your teeth on an easier, lower-risk asset
  • Higher likelihood of profit and appreciation potential from a mom-and-pop seller (due to higher cap rate and opportunity to increase NOI)
  • Most of the property management elements are the same in small and large MHPs

I've often told the story of the Dallas guy who spent his $1,000 bonus on a bank-owned duplex. He fixed it up, rented it out, and resold it for a profit. He moved up to a fourplex. Then, eight, 12, etc. When I met him 22 years into his run, he was selling his 132-unit multifamily asset for north of $11 million in 2016.

This is a doable but long and challenging path to the top. It is probably the easiest and lowest-risk place to start, and I think it will work for many BiggerPockets readers.

Path 2: Become a Deal-Finder

This path involves bringing a deal to an operator and staying on for the ride. It is a chance to get a piece of the acquisition fees, ongoing profits, and appreciation. Perhaps equally as important, you can learn the business from an experienced operator along the way.

This path may work for you if…

  • You have connections to off-market MHP owners
  • You have relationships with MHP brokers
  • You're willing to work a long list of MHP owners through calls and/or direct mail
  • You’ve got a lot of time on your hands and can “drive for dollars” to knock on MHP owners’ doors

You could also choose the related path of wholesaling mobile home parks, but that won't necessarily teach you the business as much as being a deal-finder who stays in for the long haul.

How much should you make? I have heard numbers like 5-10% of the syndicator/operator’s ownership share. That could equate to about 1.5- 5% or so of the total ownership in a deal, similar to a real estate commission.

Path 3: Become a Capital-Raiser

cash-flow

This means raising (equity) capital for an MHP deal. This is one of the most important roles in any business, and if you can do this, you will be valuable for the rest of your career.

That is, if you don’t go to jail along the way.

Let me explain. The SEC is watching. You cannot get paid to raise capital for others’ deals. Your choices are to either…

  • Become a licensed broker-dealer and charge fees for raising capital
  • Get a spot as a principal (owner) with a syndicator (this could mean you co-found the company or join an existing firm)

Please do yourself a favor and don’t work with any “wink-wink” operators who will give you an ownership stake after the fact based on how much you raise. The SEC will see through this arrangement in about 18 seconds.

Violation of their rules could mean a lot of money being paid back to investors, a permanent ban on you raising capital again, and, as I said, there are even some who’ve gone to prison.

Related: How to Evaluate Mobile Home Park Investments for Profitability

Path 4: Jump Into the Big Leagues

Did you make a boatload of cash in bitcoin? Win the lottery? Sell your tech company? Get a large inheritance? Make a fortune in semi-boneless ham? Then this may be the path for you. I’m talking about going big on day one.

This is different from the first path because that path starts small. This path will require a team. You may need to hire talent. You will need to read a lot, attend seminars, and prepare yourself well.

You may feel differently, but I don't think you should take this path unless you can give it your all. For most people, I don't think large-scale commercial real estate investments should be done in your spare time (unless you take path 7).

Footnote: If you have a high net worth, there is a similar path you can successfully do passively—but not casually. You can sign on the debt for syndicators who are competent operators but don't have the net worth and liquidity to sign themselves.

This is fraught with risk, and you shouldn’t go down this road lightly. And you should be well compensated, with monitoring and many controls in place.

Path 5: Get a Job

young smiling african american businesswoman with coffee cup in city

Yeah, I know. Most of you are here ‘cause you want to escape the 9-5. But I’m not talking about being attached to a desk and working for the man. I am talking about a job that gets you the education and on-the-job training to launch your career. This can also help you connect with the contacts you’ll need to succeed as an MHP entrepreneur.

So, what are some of the jobs you might want to consider in this arena?

  • MHP real estate broker
  • MHP lender
  • MHP property manager (perhaps the easiest job to get)
  • Various roles in asset management or financial analysis for a syndicator/operator

A similar path would be to get a college degree in real estate. There are a lot of degrees available these days, and I sure wish I could have gotten a degree in this arena. The world’s greatest real estate broker, Gary Keller, started out with a degree in real estate, and if you plan to go to school, this may be a great option.

Path 6: Hire a Mentor

America has long moved away from the mentor/apprentice model. But this could still be a great experience for many of you. The goal would be to find a syndicator/operator (or property manager) whom you could learn under.

Hopefully, you would have a skill that you could offer them. Perhaps you’re good at Excel. Maybe you’re a whiz with financial analysis, or SEO, or digital marketing, etc. You would offer the operator your services free of charge, and in return, the operator would allow you to hang around their office, attend their meetings and conference calls, and teach you the business.

It seems that the best situation here would be for the operator to be local. And I imagine most who do this would do so part-time, in the evening or on weekends.

Make yourself invaluable. Do a better job than the current staff. If you do a fabulous job for the operator, I’m guessing they won’t feel right about keeping you on free forever.

I interviewed a lady for my new BiggerPockets book on self-storage who took this path in 2009. After a short time working for free for a top San Francisco property manager, they offered her $1,000 per month. Then, several thousand. And eventually a base of $5,000 plus much more in commissions. She is now the top commercial leasing agent in San Francisco just a decade later.

The paid coaching path has become prolific in multifamily and other asset types, but it hasn’t as much in the mobile home park business yet. Hiring a paid coach can include a big event (like a three-day conference) often followed by regular coaching calls or webinars.

I had a great coach in multifamily, and I learned a lot there. I would never trade the $25,000 I spent for anything.

Note that this path can often include other paths in this post. For example, members of a paid coaching program often become deal-finders for other members of the group or the coach themselves. A coaching group often spins off partnerships among members, as well.

Related: 5 Things You Didn’t Know About Mobile Home Investing (Including How the Last One Built Is Over 35 Years Old…)

Path 7: Let Someone Else Do the Heavy Lifting

low-stress, reduce stress, landlord, landlording, rental property, tenants

Knowing what I know about MHP and (all) other asset types, I must say that passive investing is my favorite path for the vast majority of investors. Yes, I know you miss the thrill of the chase. But passive investors typically get the majority of the operating profits, the majority of the appreciation, and all of the surprisingly strong tax benefits of MHP investing—without all of the effort and hassle.

Especially if you don’t plan to do this full-time, and particularly if you’re not prepared to build a team of seasoned professionals around you, the passive route is a great option.

One thing I’ve learned as a professional passive investor in MHPs is this: It is very hard—likely harder than you’d ever imagine—to find a best-in-class operator to invest with. Our firm has two funds that invest in mobile home parks and self-storage. We have spent two years vetting operators to invest with.

Though we really like many of them, we have only invested with two mobile home park operators so far. Our criteria are more stringent than most investors, but I would encourage everyone to take this same approach when vetting people to hand your hard-earned capital.

Here’s a related benefit to the passive investment approach. The difference between a good operator and a best-in-class operator can be surprising—even staggering. The returns for a top operator can literally be two or three times higher (or more) than an average strong operator. Sound unbelievable? We have hard data to prove it.

One of the reasons for this is superior acquisition strategies. A top operator often has systems in place to give them an inside track on acquiring from mom-and-pop operators who leave tremendous upside potential in their deals. This is particularly valuable in the MHP world where about 90% (40,000 out of 44,000) of the nation’s MHPs are owned and operated by mom and pops.

As an example, we recently invested with our operating partner in a Louisville MHP that was acquired from an owner who hadn’t visited her park in five years. This park had 50 vacant pads (out of 300+), the water and sewer were paid by the owner, and rents were 20% or more below market.

It was acquired for $7.1 million on February 21st. The operator got an unsolicited offer of $9.5 million six days later. He turned it down flat because he believes it will be worth $12 to $14 million in just 18 months by addressing the issues above.

And he will be improving the park to raise the standard of living for the residents in meaningful ways.

With about 50% debt, the $3.6 million in equity will be valued at over $8 million if the $12 million valuation can be achieved and over $10 million at the $14 million valuation.

This is the power of finding a great deal. Most operators never find deals like this. This is the power of vetting a best-in-class operator. My point is that if you’re a passive investor, it is worth it to take the time to carefully vet the person you invest with.

Conclusion

So like I said, are you ready to get started in this recession-resistant asset class? If so, I've provided seven potential paths for you to travel. You may choose a combination of the paths here or a different path altogether. I'd love to hear your thoughts.

Which path do you think seems like the most viable option?

Share below.

After graduating with an engineering degree and then an MBA from Ohio State, Paul entered the management development track at Ford Motor Company in Detroit. After five years, he departed to start a staffing company with a partner. Along the way, Paul was a finalist for Ernst & Young’s Michigan Entrepreneur of the Year two years straight (1996 & 1997). They scaled and sold the company to a publicly-traded firm five years later. After a brief “retirement,” Paul began investing in real estate in 2000 to protect and grow his own wealth. He completed over 85 real estate investments and exits, appeared on HGTV’s House Hunters, rehabbed and managed dozens of rental properties, built a number of new homes, developed a subdivision, and started two successful online real estate marketing firms. Three successful real estate developments, including assisting with the development of a Hyatt hotel and a very successful multifamily project, convinced him of the power of commercial real estate. Paul co-hosts a wealth-building podcast called How to Lose Money and is a frequent contributor to BiggerPockets, producing live video and blog content on a weekly basis. Paul is the author of "The Perfect Investment—Create Enduring Wealth from the Historic Shift to Multifamily Housing" (2016) and a forthcoming BiggerPockets book called "Storing Up Profits - Capitalize on American's Obsession with Stuff by Investing in Self-Storage." Paul is the Managing Partner at Wellings Capital, a commercial real estate investment firm. Paul is offering free e-books on Self-Storage and Mobile Home Parks here.
    Brian Wagner
    Replied 7 months ago
    I'm curious which Mentor/coach you paid $25k to? RE Mentor? I attended a weekend bootcamp of theirs for $1500 and they gave you just enough info to want more. Which meant signing up for various levels of courses for 10-40k. I didn't continue but any chance I get to talk shop with a potential money man, I give them the elevator pitch and grow my network. Maybe someday I'll pull the trigger on the larger commercial multi-families. Right now I feel safe with my SFR biz. Mobile home parks are on the radar too....
    Paul Moore Investor from Lynchburg, VA
    Replied 7 months ago
    Hi Brian, That mentor/coach was 37th Parallel. I can't thank them enough for the help and guidance they gave me! There are others that promise a lot and deliver little... except high invoices for more meetings.
    Martha F.
    Replied 7 months ago
    I thought I was paying $30,000 for that mentorship, at least that is what I was promised, but unfortunately, the company I went with was one big scam. They kept trying to sell us more high-priced services and never actually called us to guide and help us. The "mentorship" was non-existent and all they had available was a phone line with employees that gave out inaccurate advice and only wanted to give you 5 minutes of their time. A friend paid for additional "mentorship" which turned out to only give him an additional 5 minutes a week of the same phone line- all for an additional $11,000-$15,000! I do believe finding the right mentor is very important, but how do you siphon out the scams? We vetted the company but it turns out they had a system to remove all negative online reviews! My husband and I did not want to try to figure things out on our own yet, here we are, in debt and without proper training and mentorship. I am glad I found Bigger Pockets but I am angry we wasted money that could have been used to invest in actual property and true mentorship!
    Paul Moore Investor from Lynchburg, VA
    Replied 7 months ago
    Martha, I am very sorry to hear about what you experienced. I have heard about this happening to many people, and this is one of the reasons that BiggerPockets exists... to provide helpful, free or inexpensive advice and a community like no other. You are in the right place! Thankfully there are some great mentors out there as well as I said.
    Daniel Thomas Rental Property Investor from Lenexa, KS
    Replied 7 months ago
    When it comes to MHP, are you buying the land or just finding the space, renting the lot and setting up a mobile home? Before spending thousands of dollars, do you recommend any websites for basic knowledge?
    Paul Moore Investor from Lynchburg, VA
    Replied 7 months ago
    Hi Daniel, Thanks for the question. Good one. I highly recommend that you buy a whole park, and just lease the spaces to those who will own their own mobile homes. That is the best way to do it. There is a method (Lonnie's Method??) that owns the homes, but I don't recommend that. Frank Rolfe was a guest on the BiggerPockets podcast last year. I recommend you start by finding his training. https://www.biggerpockets.com/blog/biggerpockets-podcast-33960000-tenantsfrank-rolfe-built-mobile-home-empire
    David Wurzel Real Estate Agent from Jacksonville, FL
    Replied 5 months ago
    Why do you not recommend purchasing a MH and then re-selling it ? Not many can afford buying a park.
    Paul Moore Investor from Lynchburg, VA
    Replied 5 months ago
    David, Actually it is fine to re-sell it. I would NEVER recommend being a landlord for individual MH tenants. Great question.
    Michael Bender Real Estate Investor from Raleigh, North Carolina
    Replied 7 months ago
    Any tips or thoughts for converting a park that has park owned homes to leasing spaces?
    Paul Moore Investor from Lynchburg, VA
    Replied 7 months ago
    Hi Michael, Yes, you basically need to start a program of selling the homes to the tenants. If those tenants can't acquire them, you may have to sell them to someone else sadly. The low-value homes should be easy to pawn off for a very low price. Frank Rolfe was a guest on the BP Podcast last year. He has lots of great ways to do this in his training. Do you have a park like this? Are you looking for one? Feel free to connect.
    Daniel Lucas from Chattanooga, Tennessee
    Replied 5 months ago
    Hi Paul, thanks for the information. I too am looking at a park where the homes are owned by the landlord. He has put a great deal of effort into them (E.g. central heat and air), but the maintenance is quite a bit. I'm debating the pro's and con's of conversion on this and eventually getting back to renting lots.
    Paul Moore Investor from Lynchburg, VA
    Replied 5 months ago
    Daniel, That is fine. I will say that many of the major lenders don't want to see too many park-owned homes and a lot of experienced operators have gotten away from these types of parks. Let us know how it goes!
    Gail Travers
    Replied 7 months ago
    Yeah, Frank Rolfe has all kinds of good ideas on how to make millions off poor people. It's his thing. So, after you make all the tenants homeless, you "pawn off" the homes to someone else at a very low price. Oh, I forgot to say "sadly."
    Shauna Abbott Rental Property Investor from Napa, CA
    Replied 6 months ago
    GREAT article, thanks Paul! Call me crazy, but I’m contemplating Path #4 and jumping straight into the Big Leagues. I bought my first house in Napa, CA at the bottom of the market in 2009 and I will be listing it for sale in the next week or so (dare I say close to the top of the market for Bay Area real estate???). I own the house outright so I plan to take all of the money and 1031 Exchange it to use as the deposit on a sizable mobile home park. But as many of you know, finding the right park is very difficult! I’ve been soaking up as much information as I can, networking, listening to all the BP podcasts, and now, posting here! I would love to connect with other people looking for MHPs and of course, would love to meet all those elusive ‘top operators’ that Paul mentioned too!
    Paul Moore Investor from Lynchburg, VA
    Replied 6 months ago
    Hi Shauna, Thanks for your kind words. I'm glad to hear you had the courage to jump into an investment in 2009 - you are a rarity! That is what we "all" would have done if we had known and/or had the courage. There is a LinkedIn page for MHP owners and they have lots of ideas and resources to find deals. You can also email me if you are looking for ideas for investing. And if you get down to the wire on your 1031 and need help, by all means email me since I may have ideas for you on that.
    Kenneth Lyman
    Replied 4 months ago
    Hi Paul, I just listened to your podcast with Kevin Bupp about mobile home parks along with reading your articles within BP about MHPs. I really appreciate your insight in this asset class and have one question: If demand is on the rise and supply is so low, why don’t you just build them instead of purchasing them? I found a MHP listed on LoopNet in my area and priced out what it would cost to replicate the same mhp (land, infrastructure, management, etc). The value of building your own would be incredible. The only drawback I found was the time it would take to fill it. Are people doing this? Am I missing something?
    Paul Moore Investor from Lynchburg, VA
    Replied 4 months ago
    Kenneth, That is a great question, one I asked myself. There are 3 serious reasons this is not practical. (1) NIMBYISM. That means "Not in my Backyard-ism." Locals don't want a new MHP in their neighborhood, so they fight it. (2) They are joined by local planning/zoning and revenue folks who see a big mis-match b/w tax collection and the services provided for the residents. Schools, streets, utilities... it doesn't add up. And (3) It takes a very long time to get to breakeven. Perhaps a decade or more, and investors understandably won't tolerate this delay in getting to profitability. There is a model that could work to beat the first two: locating in a rural location. But this makes #3 worse with low population density to fill units. And #3 could be fixed by aggressively bringing in mobile homes financed by third parties (like Buffett's 21st Mortgage) but it would take aggressive marketing to go with that, and that is a tough order to fill, especially in a rural location. Good luck, Kenneth, and reach out if we can help!