To build out the park or Not!
I have 5.5 acres that already host 6 mobile homes on it with room for more lots in the future but I also have the opportunity to get an additional 5.5 acres that conjoin my land the cost still T.B.D
I want to expand my park to allow for max mobile homes and or 5th wheel/Rv Lots.
The Positives- Booming area, High rental rates for apt/homes, Fast-growing population, high demand for lots or mobile homes to rent, Permit free area to expand the park, Perc test is good for a conventional system.
Current Lot rents for mobile homes are $225 with room to raise.
Rents for monthly 5th wheel $400-500 a month
The big-money part of this expansion:
1.5 acres of trees that need to be cleared
Septic and electric poles will be a big cost.
I hope this is enough information for you can give an educated answer to my question if not please ask anything that you feel I left out or you need to know.
Good stuff! I am in a similar situation, although on a smaller scale. I have about 2.0 acres with 5 pads currently (zoned for about double that amount). Its mostly cleared though, maybe just take down 1 tree. The big expense comes in the way of water and sewer. Water alone will run $3,300 per pad (largest chunk of which is that impact fee they charge). This doesn't include running peripheral lines from the water meter to the home (extra cost). Then there is the sewer cost. So, I'm trying to suck it up deal with the cost, and add at least 1-2 pads.
Quote from @Dave Rav:
Good stuff! I am in a similar situation, although on a smaller scale. I have about 2.0 acres with 5 pads currently (zoned for about double that amount). Its mostly cleared though, maybe just take down 1 tree. The big expense comes in the way of water and sewer. Water alone will run $3,300 per pad (largest chunk of which is that impact fee they charge). This doesn't include running peripheral lines from the water meter to the home (extra cost). Then there is the sewer cost. So, I'm trying to suck it up deal with the cost, and add at least 1-2 pads.
I guess the biggest thing I keep asking myself is will it be worth it and I keep circling back to yes.
It will be costly but if we are thinking the long game then the upfront cost won't compare to the gains in the years to come.
Where are you located?
#2 Mobile Home Park Investing Contributor
- San Antonio, TX
@Allen Martin If cost is an issue, you may want to look into working with a private lender or a partner to help fund the additional costs. Clearing land and putting infrastructure in can be very costly. So it's best to get estimates on all the work you need to do before making a decision. Also, if you bring in more homes on the land those are more costs which will add to the equation. You'll also have to factor in holding costs until you complete the project and fill the units once they're set and blocked.
Best of luck with your decision!
I guess the biggest thing I keep asking myself is will it be worth it and I keep circling back to yes.
It will be costly but if we are thinking the long game then the upfront cost won't compare to the gains in the years to come.
Where are you located?
Quote from @Rachel H.:
@Allen Martin If cost is an issue, you may want to look into working with a private lender or a partner to help fund the additional costs. Clearing land and putting infrastructure in can be very costly. So it's best to get estimates on all the work you need to do before making a decision. Also, if you bring in more homes on the land those are more costs which will add to the equation. You'll also have to factor in holding costs until you complete the project and fill the units once they're set and blocked.
Best of luck with your decision!
I appreciate the advice. I'm pretty set on getting a few lots ready at a time vs many. I have also really considered setting up multiple lots for the 5th wheels being that demand seems really high for those hook ups.
@Allen Martin I'm in SC. I believe we may have spoken via DM or on another post in the past..
My justification for adding the necessary infrastructure (water/sewer or septic) and home pad is realizing the potential of this property. It is zoned for several more pads, and I want to seize the potential here. I would only be adding the pad (park is all TOHs). Our lot rents in the area are $350-425, though some "corporate" owned parks are pushing $500.
Allen, this is how I would look at it. How much does it cost to build out each pad in total? A lot of times for these types of construction projects a lot of your cost is borne the day you start to dig. Which is to say, you will spend less money in the long run building more/all of the possible sites at one time than you will building them slowly.
Once you have that number. How long will it take to lease the sites up? You will incur costs from the start of construction through this period ie; time (time value of money, opportunity cost of oyur time), interest (if you are financing it, either from a bank or third party), marketing (to lease up the sites), and possibly others
Finally what will the lots rent for? What will you make on them?
Once you have all of that information you can calculate your return on investment. Take your NOI generated from the new sites divided by the total cost
Is that return higher than what you are getting elsewhere? Then go for it!
@Allen Martin and BP members on this thread,
So, I've decided to pass on building out more MH pads in my Park. I've looked at all the costs associated with setting up the infrastructure for public water and sewer. These utilities total in excess of $11-12k for each pad. To recoup those costs, it would take me 2.5 to 3 years. At one time, we thought there may have been an old septic we could use, saving maybe $5k, but that didn't materialize. Therefore, I am not moving forward.
Very rarely does the "math" work out in terms of building a new park. Sadly the costs of permitting, digging, infrastructure, etc. are in excess of buying a "used" park. I have only seen this work when the owner of the park also does all of the work and has a "crew" which is apart of their broader enterprise. This way you are not incurring external labor costs which are typically half of all the work which will be done. Good luck! JG