Due Diligence Check: Buying Auction Units in a 55+ Mobile Home Community

[Eugene Harris]

Looking for feedback from anyone who has actually bought, rehabbed, sold, or leased in a 55+ mobile home / manufactured home community.

I’m evaluating the purchase of two auction units in the same 55+ community.

Current diligence completed:

• direct conversation with HOA
• reviewed CC&Rs / bylaws / governing docs
• verified there don’t appear to be blanket restrictions on purchase/resale or purchase/lease strategy
• ran title checks for liens

For those who have operated in this niche:

What are the biggest mistakes first-time investors make in 55+ communities?

I’m especially interested in:

• exit liquidity on resale
• problems unique to auction purchases in these communities

Trying to figure out whether I’ve covered the important bases, or whether there are deal-killers I should still be checking for.

Would appreciate hearing from anyone with direct experience.

[Jason Wray]

Eugene,

First off you can make some decent money if you plan on buying them 24/7 and either long term hold or renovation and re-sale.  Number one rule of thumb is "Know the rent market" Do not assume or use online sites to gauge rents.  Go the distance and talk to the community and find out the common rents for log term rents.  Find out if they allow short term rental or mid term rental in mot cases 6 months is the shortest rent period.

Make sure you check with the HOA and management and ask for a copy of their budget and reserve account balance. In most cases you can see a million miles away which parks are under water and not holding sufficient reserves. What that means is the HOA will be going up every year or in some cases they literaly "Double" the lot fee and call it a "Land lease".

Make sure you pay for an inspection and make sure they check  for "Mold" & Termites" which is very common in 90% of  mobile homes due to wood frame and no foundation just sitting on pillars, concrete slab and may or may not have skirting.  

Main goal is if its going to be a rental whats your maximum long term rents and does it make sense afer the lot fee or land lease.  They have a high turn over ratio so it makes long term harder and the typical renters are on SSD or SSI retired and on a slim budget.  Also keep in mind when you go to sell the mobile home in a park the buyer must have either 'All cash" or get approved for "Chattel financing" not hard but need good credit, income, and reserves (No late payments in the last 12 months and No major collections on credit).

Yuu cannto get a traditional loan/mortgage on a Mobile home that is on lot lease must own land or use "Chattel loan".