Developing a new mobile home park- Help

[Samuel Coronado]

I am starting a park that will end up with roughly 20-25 lots on plot of land that's roughly 20 acres (including an existing 4/2 house). The house rents for $1200 month currently and will be able to get $1600 if renovated (finish basement bathroom, new flooring and fixtures, mainly cosmetic). I am having land cleared soon for either 4 single wide homes or 2 doublewide homes. The singlewides would be roughly 1000/month gross rent each ($4000 total). The doublewides would be $1500 gross each ($3000 total). I am leaning toward the doublewides for longevity and lower turn over purposes. On the other side, I am planning 15-20 doublewides. These will be done in multiple phases.

But per lot it will cost roughly the following:

$1,500 Electrical poles, meter installation

$2,000 water taps and connections

$5,000 grading and land prep

$8,000 septic installation (assuming a 1:1 ratio of homes to 1000 gallon septics)

$5,000 down payment on each home ($700-750 / thereafter per unit)

$21,500 total set up x 17 = $365,000

Ongoing expenses after development would look something this for POH model:
$12,750 a month in mobile home mortgages (17 x 750 for PITI on each unit)

$1,900 a month in land mortgage PITI (house)

$3,000 a month landscaping

$2,000 a month in reserve emergency fund

$2,200 management

$21,850 a month total expenses

$262,200‬/year

Ongoing incomes after development would look something this for POH model:

$27,000/month ($1500 x 18 {17 mobile homes plus house})

$324,000/year

324k-262,2k = 61,800 net pre-tax profit or $5,150/month.

Opportunities to reduce start up expenses:

Bulk deals with the government or contractors for doing all the work at once (electrical, water, land grading, septic)

Trade free rent for someone to mow and landscape (turning a $3k event into a $650 event every month). Savings of $30,000 a year.

Management fees- free rent in exchange for licensed agent living in the community and coordinating work orders, etc.

$288,000 income - $199,600 expenses without management and landscaping = $88,400 / year or $7,366/month.

Doing the numbers on a commercial property value calculator, without debt service I will be at at a valuation of $3,026,400.

Property is currently worth $425k before the land improvements and development of $365k being added. $790k turning into a multimillion property seems like it's too good to be true. Can someone tell me what I may be leaving out before pitching this?

This deal works best with an equity partner and I have a short list of those who will be looking at the deal soon.

[Dustin Tucker]

Hello Samuel,

I would look at 

https://www.mobilehomeuniversity.com/

these guys are out of Colorado and own thousands of spaces across the country.   The one item I see on your list is that you are planning on park owned homes, on paper that looks like a good idea, but I think that gets away from the advantage of owning a MHP.  The whole point of owning a MHP is so that you don't have any maintenance, such as clogged toilets, appliance repairs, mechanical system repairs. The 2nd reason to stay away from park owned homes, is that you lose the advantage of the MHP, which is essentially a trapped tenant, because they own their house, and they cannot move it, you have a guaranteed renter.  The last reason to avoid park owned homes, is they only do 1 thing and that's depreciate, unlike stick built homes, the park owned homes are going to rapidly depreciate, so instead of an asset you have a liability.  There are model programs with all the major MHP builders to bring out models to your park, then you can sell the unit, and collect your lot rent.

[Rachel H.]

@Samuel Coronado I think a lot of it has to do with the time to develop the land and then fill the lots. It doesen't happen overnight. 

I've seen other investors get into these types of deals based on potential income. It sounds great on paper. Though, it takes time and money to make it happen. 

So just be prepared going in. Mistakes will be made, which can cost more time and money. It's just part of the learning process. 

Regarding resell value, it will depend on the market and if you can find someone willing to purchase for the price you're valuing the park at. Like anything, it may take a while. 

Best of luck with everything. Hope that helps! 

[Jay Hinrichs]

I would have a deep conversation with whoever controls your onsite sewer..

[Samuel Coronado]

Quote from @Jay Hinrichs:

I would have a deep conversation with whoever controls your onsite sewer..

 Can you elaborate on this? We will be installing 1,000 gallon septics on a 1:1 ratio for every home. $8,000 a piece for installation, connection, and field lines. 

[Jay Hinrichs]

Quote from @Samuel Coronado:

Quote from @Jay Hinrichs:

I would have a deep conversation with whoever controls your onsite sewer..

 Can you elaborate on this? We will be installing 1,000 gallon septics on a 1:1 ratio for every home. $8,000 a piece for installation, connection, and field lines. 

many jurisdictions would not allow that many seperate septic systems.. If I was doing this first thing i would do is talk to the county office that control sanitary and see what they will allow. this of course assumes your zoned correctly etc..  The county may want one master drain field with an established Alt. field if the first one fails. etc etc.. its very county specific so thats where I would start..  Zoning make sure its zoned  then health department for waste disposal.

[Jay Hinrichs]

Quote from @Samuel Coronado:

Quote from @Jay Hinrichs:

I would have a deep conversation with whoever controls your onsite sewer..

 Can you elaborate on this? We will be installing 1,000 gallon septics on a 1:1 ratio for every home. $8,000 a piece for installation, connection, and field lines. 

PS when you go into the health department ( or whoever controls on site sewage) you may find out also that your individual systems and tanks are fine.. but you want to know for sure before you spend any money.