mobile home parks

7 Replies

ok, so i have what looks like a great deal on a mobile home park, i'm just trying to figure out which route i should take once i buy it. the current owner has 16 mobile homes which he rents. he has never owner financed or rented spaces. i would have all 16 fairly new mobile homes included in the price, plus 100% occupancy, and the land. the park is set up for 19 mobile homes total, each running on a seperate septic system, but he bought it with 16 homes and has never used those other three lots. i have 2 months until the first three rental contracts are up and i can do what i want with them. i have heard wonderful things about rent to own over four years and then when their mobile home is paid off, they can either move it off your land, or they can continue renting that lot. this way, they pay a rent amount for the land and also seperately they are buying the home over usually 3-5 years. my question is if this deal comes with all the homes, how do i go about switching (after their contracts are up) to a better solution such as rent to own? i can't do a lease with option to purchase with 3-5% of value non-refundable because trailors depreciate unlike houses...or can i? it would be great if i could do this and i am new to all things "mobile home". i just know that this looks like a great deal, even if i kept renting exclusively. although i don't really want to be a landlord and be responsible for all repairs. any help would be great.

As a rule you need a minimum of a 12% cap rate for a MH park deal. In order to calculate whether this is a good deal or not, you should use the following formula to arrive at a ball park purchase price:

lot rent x # occupied spaces x 60 PLUs
lot rent x # unoccupied spaces x 30
then you've got to add a resonable price for the park-owned mobile homes.

So if your lot rent is \$150 per month, then it should look like:
150 x 16 x 60 = \$144,000
150 x 3 x 30 = \$13,500.

So the value of your park (land, hook-ups, etc) is around \$157,500. The you add the value of your mobile homes.

I sell mobile homes on contract (not rent-to-own). I wouldn't buy a home that I couldn't get triple my wholesale price for. So if my market analysis tells me that a 1993 3/2 single wide will sell for around \$10,000, I'd buy it for about \$3300 MAX, and then it depends on condition.

So i you've got 16 1993 singlewides that you can sell for \$10k each, then you can pay \$52,800 for the whole package.

I wouldn't do rent-to-own. What you do is sell them on a promissory note and retain the title as the lienholder until the note is paid off. Remember that MHs are not real estate, so you've got a lot more flexibility in terms of what you can do with them. I usually charge 13-18% interest and my average monthly payment is \$250 for a home.

Now, you should also realize that banks will be very hesitant to loan you the portion of the purchase price that you are using to buy the mobile homes. Banks don't usually lend on mobile homes. You might try to get the seller to carry a second for the price that you negotiate on the homes.

Be sure to do A LOT of due diligence. The infastructure of the park needs to be thoroughly checked. Also, city and county governments tend to dislike mobile home parks. make sure that you can retain the zoning that you need to keep the property as a park. Another thing is that you should be sure that the spaces can accomodate 16x80 mobile homes.

Thats all I can think of. Hope it helps.

Originally posted by "newby":
<snip> although i don't really want to be a landlord and be responsible for all repairs. any help would be great.

I woudnt either, thats why I'd only sell the MH and carry the note. Let the other people pay it off for me, and hope they leave or give it back to me before its paid off, so I can get another deposit and sell it again.

How can you not make money with something that is FREE!

@Ryan Beckland I know this is an old post, but I had a question on your formulas. Here is an example of a deal I'm looking at there are 15 vacant lots that could be probably rented for 100. there are 18 park owned homes (12 rented 6 vacant and in need of repairs). Just knowing that what would be the max that you would be willing to offer?

Originally posted by @Jason Ray Richardson :

@Ryan Beckland I know this is an old post, but I had a question on your formulas. Here is an example of a deal I'm looking at there are 15 vacant lots that could be probably rented for 100. there are 18 park owned homes (12 rented 6 vacant and in need of repairs). Just knowing that what would be the max that you would be willing to offer?

Jason, what did you end up doing?

Originally posted by @Matt Williams :
Originally posted by @Jason Ray Richardson:

@Ryan Beckland I know this is an old post, but I had a question on your formulas. Here is an example of a deal I'm looking at there are 15 vacant lots that could be probably rented for 100. there are 18 park owned homes (12 rented 6 vacant and in need of repairs). Just knowing that what would be the max that you would be willing to offer?

Jason, what did you end up doing?

I didn't get a lot of feedback. That coupled with what I knew about the area I chose to pursue some other opportunities. However, I believe it is still on the market.

This is an OLD POST, so not going to put a lot of time into this response, but I have a different approach when looking at MHP for sale. I want UPSIDE/ADD VALUE parks, so I look for low occupancy, lower than market rents, low CAP rates. This gives me tons of upside and I want a park with mixed use, meaning, I want some TOH (tenant owned homes), some POH (park owned homes) and maybe even some permanent RV spaces. Just depends on the park and area. I focus on MHP in the Midwest and South.

As for carrying notes as mentioned above, I would rather have POH where I continue to get unit rent and space rent for however I keep the units occupied, and many/most never leave. Also, I would not allow a tenant who pays a unit from me to remove the unit for at least 3 years from time of sale. I want BUTTS in the seats and get park rent.

Lastly, the guy who posted about charging 12% to 13% on notes..That's a violation of the USURY LAW, which has a CAP of 10% rate on private notes. Only financial institutions can charge more.

Good luck to all.

It is extremely interesting to see what people were saying 12 years ago on this thread.  First of all, if your buying criteria is a 12 cap minimum to even consider looking at a deal, you would not likely be buying anything.  Even though cap rates for MHPs and RVPs are historically higher than other asset classes, I have found really good deals with lower cap rates, but with a lot of upside.  Keep in mind, the cap rate going in is not as important as the cap rate when stabilized, so if you can buy a good asset in a good location with a lot of upside, paying a lower cap rate may still make sense. If you are patient and work hard to find deals, you can find deals with low occupancy, lower than market rent, and expenses higher than they should be, which all point toward significant upside.

As it relates to the interest rate you charge when lending on homes, it is important to consider the big picture, which is "quality residents paying lot rent".  Even if you have to sell the homes at zero interest, it is better to have a quality resident paying the lot rent every month than it is to make money on the loan.  Plus, when you create an environment where the resident wins, they tell their friends and those referrals may have more value to you than any interest you could charge.