I've Got (Lots of) Questions. Hoping the Community May Have Some Answers!

12 Replies

Hello All! Long-time lurker of the forums but I finally wanted to sign-up to ask the community for their input on some specific questions that I have and haven't been able to answer on my own.

I am a commercial real estate broker living in Chicago. For the past year and a half I have been brokering apartment buildings around Chicago. I have had good success so far and by all of my colleagues' and mentors' accounts I am moving quickly in the right direction towards a lucrative and successful career. That said, I have never had a significant interest in or passion for apartment buildings. They would not be my first choice to personally invest in, and if this is what I will be doing for the next 30 or so years, then I would like to be doing something that gets me excited and is not just work.

I have earned enough respect from my peers at this point to switch product types without ruffling many feathers and I am very seriously considering switching to a focus on mobile/manufactured home communities. There are certainly guys in our company that have had much success brokering manufactured home communities, however they mostly focus on seniors housing and the much "cleaner" stuff that tends to be found in the West, Southwest, Florida, etc., whereas I would be targeting midwestern states such as Illinois, Wisconsin, Iowa, Indiana, and later on Kansas, Missouri, Nebraska and Oklahoma where the parks tend to be a bit lower quality and are often rurally located.

For this to work, I believe I need at least a minimum of 1,200 or so parks in my farm area, each with a minimum of 50 to 60 lots, and a value of somewhere between $750k to $4M.

  • --- 1,200 parks is an estimate based on my experience in the apartment world; this number could be higher or lower depending on the velocity of this product type in my markets.

  • --- 50 to 60 lots because my understanding is that 40 to 50 lots is the minimum number of lots needed to provide the economies of scale to reward a passive/remote investor, and from what I've seen even the nicest parks in the Midwest typically don't trade for much more than $20k/lot with the bulk of them trading closer to $10k/lot or less; I would prefer that the majority of the properties in my database are large enough so that the prospective buyer market is not limited to a local buyer. Obviously this changes if there is a cluster of a few smaller properties that can be run from a central location, and I would still make an effort to network with local brokers and buyers to engage the local market were I to follow-through with this plan.

  • --- $750k to $4M because of the time and money involved in driving to, underwriting, marketing, and brokering these properties, I need to make sure that I am working towards a commission that justifies said time, effort, and costs. I also believe that much above $4M and you are starting to alienate the majority of the private market buying this product type (my target market), and with the limited number of substantial players in this industry the majority of these transactions will be done principle to principle. Please let me know if you feel this notion is incorrect or if you feel that number is much higher/lower.

My questions are mostly in regards to the industry in general as it pertains to the way properties trade hands and the players involved. There are certainly enough parks throughout the states I mentioned that meet the minimum 50 to 60 lot threshold to build a sufficient database, but the difficulty I am having is due to the way these parks are valued-- some 40 lot parks trade for $1M+ and some 100 lot parks only trade for a few hundred thousand. My questions are as follows:

  • --- Is there any way that I can begin to get a ballpark idea of which of these parks are decent product that is approaching the $750k threshold I mentioned without physically visiting each park, seeing the financials, and knowing how many homes are park-owned? I've considered tax records, population within a radius, whether the roads are paved/unpaved, vacant lots showing on google maps aerials, but none of these has seemed to provide a reliable indicator.

  • --- In general, is there even a market for these lower to medium-quality, secondary/rural-located parks that tend to be dominated by single-wides?

  • --- I have access to CoStar via my firm. However, CoStar is not perfect and I have already come across properties that transacted and CoStar did not record.  That said, CoStar only shows 43 sales since 08/01/2013 (one ytd) for the four states I see myself focusing on initially (WI, IL, IA, IN), and that number drops to 25 if I limit that search to sales $600k or larger. This number seems low to me, but I don’t know if it is because CoStar misses a lot of the sales due to the product type, locations, creative/seller financing, etc., or if this is an accurate number and there simply isn’t a lot of velocity in the market for these communities. Are there any other ways to track sales that you are aware of (trade publications or associations, specific research papers, etc.) that might be able to provide a more accurate estimate of how many parks transact each year? Or do the numbers I presented strike you as mostly accurate and there simply isn’t a lot of trades taking place?

  • --- My understanding is that it is very difficult to get deals done when there is a large portion of park-owned homes. Is this true even when the seller has accepted a selling price that corresponds with generally accepted industry valuation methods? Or is the real issue that sellers simply lose motivation by the low values assigned by generally accepted industry valuation methods on park-owned homes? What is the tipping point in terms of park-owned homes? What percentage of parks meeting the criteria I outlined would you estimate are above this tipping point?

  • --- There is is usually a discrepancy between what sellers think their property is worth and what buyers want to pay (and hopefully it stays this way or else I will be out of work!). However, my understanding is that this discrepancy is often much more pronounced in this industry since many of the parks have a large portion of park-owned homes to which not much value is assigned. In addition, many would-be sellers choose not to sell because the value they can get from selling they do not feel adequately rewards them for the annual return they would be foregoing by selling it, especially if there is more than a token amount of park-owned homes generating income. Financing can be difficult, especially in regards to the lower/medium-quality single-wide parks, and the culmination of all these elements results in a landscape where it is often difficult to get deals done. Does this reflect your experience? What would be your recommendations so that I might begin to weed-out the parks that are going to be low value, possibly unsellable time-sucks from the decent quality product that is sellable and there is a market for? Elaborating on this, I should mention I already have a basic understanding what makes some parks more desirable than others (type of septic, city vs private sewer, % of park-owned homes, age of homes, etc.). I am asking what would make a park very difficult/impossible to sell even if it is priced correctly.

  • --- Is there any other reason that I may not be aware of that it is going to make it extremely difficult for me to break into this product type and build traction? (a firm that already has an extremely strong presence and dominates this space, a strong aversion/distrust of brokers by owners in the community, etc.)

I apologize for the long-winded post, but I wanted you to have a full understanding of my concerns as this is a significant decision for me. Thank you for any insight you may be able to offer.

Well Well Well... 

So in general, to figure out a parks value you need to know space rent and the number of lots. There is other data you can use to try to back door where space rents should be. If you look at a 2 bedroom, 2 bathroom apartment rental average, space rent amounts to about 1/2 of that number. So if rents are $500 / month, figure a good ball park for space rent is $250. Or at least the market should bear that. Most mid west towns, the smaller ones, will be in the 150 - 350 range. There is a very complete list of this data, but it is privately held and to my knowledge, not shared. If you were to data mine one park in each metro area, you will have a baseline. Some states have lists of mobile home parks, the lot numbers and the owners info. I know- I am on several of these lists. So you will have to adjust the number of lost you go after in each general area if you really want to stay over the $750,000 purchase price. If it was me- I would go after every park over about 30 spaces. You do not need to visit the parks to list them. Another option for the smaller parks is to develop a pocket listing list of buyers, and just market the data through that list. Well priced smaller parks go under contract in hours, not weeks or months. They close in 30 - 60 days with seasoned investors. 

Park owned homes give a false reading on your CAP rate. This is why they are very, very hard to price and banks go crazy when the contracts come in. So here is how you value them, separate out the lot rent- CAP it and you have the parks value. Now value each home at the 'blow away' value. If the home were to be blown off the park, what would the insurance company pay on it. You might deduct the moving costs if your really accurate. Your now selling 2 businesses- a mobile home park, and a flat apartment building, that does not hold its value. So 5 years from now the homes are worth less than today. Sellers and buyers should understand this, many choose to ignore it though. Like cars- the values lower until you hit a basic bedroom / bathrooms have value number. Also- there is more value for a 3 bed home than a 2 bed home- even if they cost the same. So add more tot he 3 bed, or take some away from the 2 bed. These parks have much more in the expense column, and they are much harder to sell because they are not as passive as a space rent only park. So even the CAP number is higher. How much- 1-2 points- more if the homes are very old, or lots are vacant. I bought a full park in Indiana- 76 pads, all park owned for about 350K. Once the park is fully converted and rented out as a space rent only park- I will market it for about 1.3mm. If you understand what happens with cash flow these deals will give you chills. So the deals work IF they are priced right. Learn how to value these and you will know which ones to list.

Most owners of parks do not know how to value a park. Because of this- someone says it is probably worth 2 million and they instantly have most of that money spent. Unwrapping bad information is a long task, but if you can walk an owner through the pricing process you can teach the owner what the value really is. This is the process I use to put deals under contract. I never toss out a number. I get a pad of paper and a calculator, and I ask they do the same. We both write down the same numbers and we both do the math. In the end- the numbers do not lie. If the owner still wants more- well for me it is time to walk. Let someone else list those deals. Maybe they will call you back when it does not sell. time suckers are parks that are overpriced. Price them right and they will sell right away. I listed a park a while back and had 20 calls the first 24 hours. You do not need to leave much chicken on the bone to make a park look really good. 

There are very few good brokers for mobile home parks. Remember your selling cash flow, not the Willis Tower. My park with all old single wide homes makes the same money per lot as the fancy double wide park up the street. In fact- it makes more. Because people get caught up in how it looks, many will not touch the older parks. Well- the CAP rates are then higher, and the cash on cash goes way up. No one steals homes from an older single wide park, everyone wants the big new ones. So the older parks can be much more stable and your inventory tends to stay.

ok- I am tired. 


Fantastic response!

You said well priced smaller parks go under contract in hours. Are these the ones listed on MHPS/loopnet, or even the pocket listings too? I've read elsewhere that the bigger parks (100+ lots) are the ones with the toughest competition, and smaller parks are easier to buy due to a smaller pool of buyers that doesn't contain many professional investors. Not true? 

Also, regarding pocket listings could you clarify how the broker/buyer relationship actually works? Like does the broker have a list of "verified" buyers that he then emails any new pocket-listed deals to, with the first response getting the deal? From what I've read of Frank and Dave's material, they tend to suggest constantly calling brokers for new deals instead of new deals automatically getting sent to them because they're on the list.

Thanks for your help.


Great questions. There are two real sets of buyers, individuals and institutions. Most individuals operate under the 100 pad number, and almost all institutions operate over it. So it is in the open, I used to teach / present at all MHPS Bootcamps when they started out. So I understand the material- we very well. I have also partnered with Dave on a couple of parks. 

The great deals on The Mobile Home Park Store never see the public eye. If they are really good, they are weeded out and held internally for Dave and Frank to buy with their fund. The second stop for listings is there is an advanced list you can buy into- so prior to the deal hitting the website a select group that purchases advanced assess goes over the listings. So the deals that really hit the website have been picked over twice, and your probably 3-5 days late in seeing the listing. So not much sneaks through  that filter. Loppnet can have some good listing- but it is a footrace. I called on a deal once, and so did Dave Reynolds. He called about 15 minutes after it hit, and I called just after him- and neither of use even got a chance because we were well down the list of people that called in. If your playing the footrace game, you better be willing to put a deal under contract on the first call- period. 

So you need to develop a list of brokers and there are options for this. So I for instance have names and addresses for park owners in some states. I might print out that list for a broker, like mailing labels and let them contact them. With the understanding I am looking for a look at the leads. Or, I might contact the owners myself, and the deal I know are looking to list- I will feed to a broker, again with the understanding they will feed me leads the other direction. The best way I have found is to develop an email list, and contact brokers once every 3-6 months. I only do this when I am looking because there are just too many deals to look at. I will mail out to 500 brokers and probably see 5 parks I had no idea were on the market. It might take 2500 emails to find a killer deal, but there are good deals in every batch. So, yes you need to contact agents. The big house agents do big house deals- and every now and then do a smaller deals. 

On the broker side, frankly not enough do mobile home parks only to have a good list. So I jog the memory of them if I am looking. There are 'deal hunters' out there also that just find deals and flip contracts or leads for a 'spiff' I call it. 10 - 50 thousand depending on the deal. Yes- I once paid 50k for a great contract. 

On the buyers side here is the deal- really good deals are dug up. Contact park owners, contact agents. When I contact agents it goes like this- I get a call- 

'well see- I know old man Fred, ya know on the north side, that crafty devil. Well he has that park, probably 50 homes in it and well, his wife is not feelin so well and they are spending more time at the winter house in Florida and in the RV. I heard tell at church last month he was gonna sell... maybe I will stop by the Diner at breakfast next week and see if he is interested. What kind of info are you looking for?'

And I have now generated a pocket listing. I get the location of the park, and with google earth I know more about it in 60 seconds than most people will in a full walk through. In the next 2 minutes I have a good idea of what my top offer would be, I just need to understand some income and expenses more. That is were the meat is on the bone- make your own wind. This is the same advise for brokers and buyers. 

Jim, I was hoping your name would show up in this thread. Thank you 1,000x for taking the time to read my post and offer a thoughtful response!

Your responses confirm many of my suspicions about this space. I feel that this area of RE is underserved by the brokerage community. Regardless of product type, most active owners don't have time to weed through the sea of overpriced/misrepresented crap that tends to be found on Loopnet and similar listing sites, then find that "diamond in the rough" and go down that road for a week only to find out his 12% cap is in reality more like a 6% cap. Plus, it seems to me that the lion's share of brokers listing these properties are local ReMax's etc. that have no idea what they are doing and have no business marketing these types of properties. If he/she was competent broker that understood how to properly underwrite these deals, how to educate buyers and sellers, and how help get deals across the finish line, then I believe there would be much value in that for all parties.

Very informative on the MHPStore listing process. Quite the genius lead gen system for it's creators.

Could you elaborate on what you are looking at/for when you zoom in on Google earth? Vacancy? Paved roads? General condition of the park? Is there a way to guess whether it's on city sewer/utilities?

Do you have any thoughts on the sales figures I offered? This is probably my number one concern. Even if only anecdotal, does 43 sales per year / 25 sales per year above $600k seem accurate to you for IA, IL, IN, and WI? My thoughts are that many sales may not record because they sold on contract but this is just a guess and the low number is a concern to me.

Also, what would be your recommendations for required reading/courses on this subject matter?

So when I use google earth, and also street view... I am counting lots, using the measure tool to check the size of the homes and the lots, get a basic idea of lots per acre, paved or gravel roads, the type of trash service, years of homes, looking for septic fields- (you can choose what overhead date you use on google earth, and in the winter months sometimes the leech fields will be green strips), looking for utilities- overhead power etc. On street view I can see the park from the street- and many times they drive the cars through the parks. Some parks you can spot a private treatment plant, or a water storage building. I look at distances between the park and other things, like schools, fire departments, stores etc... I look for RR tracks as well. Scrolling through the differing dates I can see if homes move in and out of the park, I can look for other parks close by. I might start calling the other parks and begin some market research. So I am looking at small tings in the park, and larger things in the community. 

As for reading material- what are you trying to learn? Ownership and operations or how to value them? 

 As for reading material- what are you trying to learn? Ownership and operations or how to value them? 

To be a good broker I feel it's necessary to understand not just underwriting but also an owners perspective, so I would say both. Specifically for parks. I am only interested in the homes as it applies to valuing them for underwriting a park, transacting the park, or as they apply to the bigger picture of owning/operating the park.

In other words, I am interested in how to value and transact parks,, how a park owner would view park-owned homes, tricks park owners might use to fill vacant lots or convert home rentals to pure lot rentals, etc, but I'm NOT interested in mobile home investing specifically, unless the information is something that would be beneficial to a mobile home park owner. 

Hi all,

Great questions Jordan and even better feedback Jim. Thanks for posting and commenting this information. 

All the best,
John Fedro

So I understand what your looking for, but if you want real life stuff I am not sure you will find it in the classroom or in a book. There is clearly good data in the bootcamp offered by Frank Rolfe, (Dave Reynolds no longer teaches at the bootcamps) but Frank is not a typical operator or owner. They sell a home study course- that has DVDs which might give you enough to feel comfortable with. There is also a due diligence manual that really lays out a good process for having a park under contract. Things that need to be done, layouts for dates etc. I think if you read through the different forums you will quickly see the challenges owners face, and how they solve them. You will also see how people view differing things in the park industry. 

You might try just talking to park owners and asking them to share what they like, what they do not like etc about the business. Most owners I have met are very down to earth and would gladly take some time to talk shop. You should probably learn how to walk a park, what to look for etc. For that you might ask if you can tag along for a park owners visit to one of their communities. You might be buying the tickets, hotels etc- but you will learn more in a good day with a good owner- than you will with any books or classes. 

If your really wanting to dig into the listing side- you might look into CCIM classes. You might already have this training, if not even the intro class is valuable. In a previous life I had a real estate licence... but that is another story all together...

There are also several very good linked in groups. I am also pretty sure there is a big group that meets every year in Chicago. I have been invited in the past, and might even attend if I have the time open. If you find me on linked in- I think you can see the groups in my profile. Anyway- If I think of more I will add to the post...

@Jordan G.  

 Hi Jordan,

I am currently working as a MHP broker in AZ. I am working with my father who has been in this business for over 10 years and is doing quite well (I would say he controls most of the market in AZ). 

Since you are starting out in MHPs as a broker I will give you advice based on what he told me and how he got started. 

First off, we never really use loopnet or Costar. And when we do use costar it is usually for comps or to add recent sales into our own database. We never list properties on the MLS and all of our listings are pocket listings.

I recommend focusing on Parks that are at least 80 spaces or 1 million or more. In fact the bigger deals are the easiest deals to do. In the larger deals you deal with people like Jim Johnson who have bought parks before and don't need you to hold their hand through the entire process plus the pay out is more. Second I recommend you build your own private database. The advantage of being a MHP broker is that technology has not caught up with this niche yet. In fact costar and loopnet have almost no information or very faulty information on MHPs. This makes having your own database even more valuable. If you have the information, know who is buying and selling and where the deals are you will own the market in your area. 


Thank you both for the responses.

I will probably purchase Rolfe's courses soon enough, but for the time being they are a bit rich for my budget. I can lean on people w/in my company for now, but if there are any good, more reasonably priced options I would be interested.

Andrew, I agree with wanting to focus on larger parks. It is ironic but true that it's often easier getting a larger deal done than a small one due to the sophistication of the parties involved. That said, for the markets I'm targeting initially at least 75% of the parks are under 100 lots and probably only 400-500 unique owners of 100+ lots. Plus these are the parks every broker is targeting; plus many motivated sellers of parks over 100 lots I would suspect have already been picked over by the big players due to the limited quantity of large-size parks. I see myself targeting mostly stuff under 100 units early on and doing as much volume as possible, and as my business evolves and I earn the credibility to list larger parks, at that point starting to expand geographically and limiting my focus to larger parks 75 units or more.

@Andrew Warner

Andrew, my impression is that while some owners don't mind POH, they are generally considered a turnoff to most buyers. I know there are issues with financing the chattel, but assuming financing wasn't the issue (b/c of seller financing or some other reason), are there some buyers that actually like POH parks? Is there an add-value play, higher cap rate, etc? In other words are there just different buyer pools/markets, similar to guys in the apartment world that like stabilized turnkey apartment deals vs guys that like add-value apartment deals?  Or are you pretty much setting yourself up for a headache and tough sale any time the park has more than a token amount of POH? For my area (midwest), these tend to be single-wide and I believe mostly dated homes.

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