Any difficulties investing within mobile home parks?

Question

Just recently spoke to a local investor who has been investing in mobile homes for many years. He also runs a home inspection service which includes mobile home inspections as well. We never actually met in person, but I was referred to him by a fellow investor. He sounds like an older gentleman, with plenty of information to share. Our conversation was very informative, yet a little discouraging.  Based on our conversation, he said that investing in a mobile home within a park, is very difficult. That many parks are reluctant to let people purchase homes, who are not planning on living in the community. He went on to add, that many also require the same type of approval that a potential mobile home resident needs to go through. In such a case, I would not qualify. Part of my current struggle, is not having good credit.

I try not to let things like this hold me back though. It’s tough enough when you hear discouraging comments from those who are close to you. Hearing such comments from someone who has been investing for many years is a little disappointing, but does raise a red flag with me. I can’t help but wonder how many mobile home investors actually face such roadblocks, with these parks. Obviously, others are doing it.

If anyone has experienced such problems with investing in parks vs independent land?

Michael Meeks · Answer

varies by park. I have 2 mobile homes in different parks. I'm negotiating the purchase of the park with one owner who is ready to retire. In the 2nd park the owner immeditely took me to another tenant who was in financial trouble and needs to sell.

This is a very profitable business because bank lending is virtually non existent and decent affordable housing is hard to come by.

Jay Hinrichs · Answer

@Orlando Paz

really depends on the park.. I just bought a park in Oregon.. its low end to lowest end If you wanted to buy everysingle home and take over those tenants be my guest I would be estatic

flip side nice B to A park and you don't want a bunch of renters in your park when most are owners.. we know the difference between and owner and renter.

Bill Neves · Answer

@Orlando Paz @Harold Anderson Hi Harold! @Howard Abell

This is a people business.

Advantage of a park - lower entry fee. You are not buying the land. I've done many MH deals in parks. I've bought several thru the park manager on a referral. I've gotten them for $1000 including 1 month rent, $500 including 2 months rent. I netted $9500 on both of those. I'm going to look at one tomorrow that I'm pretty sure will be $500 and at least 2 months rent thru a park manager.

A friend of mine has gotten them for $1 thru a manager he knows. Yes they need some work but not like a rebuild. If it is, walk away.

Had I not cultivated a relationship with park managers/owners, those deals would have gone elsewhere.

For these reasons, I like to get to know the manager and/or owner.

Disadvantage - You are at the mercy of the manager/owner. This can be a challenge. See below...

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You can go 2 ways. Probably more ways but...

1 - You can be the bank. Take over a home, send the park a letter that you've taken over the lien. Just like Bank of America might and update the home. Then sell it. That way you don't have to qualify in the park.

2 - Better to get to know the park manager/owner. Why? You need their cooperation. They must approve people to buy and live in the home once you're done.

Caution: Again, you are at the mercy of the park manager/owner. I've had good luck with ALL BUT ONE park. The owner seemed fine when I started working in the park. However, over several weeks became more and more demanding and less and less cooperative.

i.e. - Had an outside inspection of required updates. Then later wanted me to add a fence. Wanted me to change the metal roof to shingles, even though the roof was in excellent shape. Etc.

Then because I said the outside inspection didn't have those add ons, she became very tough to work with. I sent at least 20 people to get qualified and there were several 'reasons' why they didn't qualify.* 1 couple was required to neuter their dog. They refused so didn't buy.* Another single female, 19, was only on her job for 6 months. She had $80k in the bank from an inheritance and offered to pay a years rent up front. But was turned down.* One couple from Mexico didn't have the 'right' paperwork.* 3 of the couples bought a home from the park owner instead of me after I sent them to the office to get qualified.ETC

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Had to play a little psychology - I finally told the owner, I just wasn't cut out for this business and I was going to pull the home out of the park if I didn't get someone qualified and 'magically' someone I sent the next week, got qualified. This just happened a few months ago, Feb 2015.

AGAIN this was an isolated park. I've since done 6 in other parks. So just do your due diligence and avoid incidents like that park.

For me, mobile homes are a great business. Low cost of entry and better returns on the investment dollar. But not for everyone.

Have fun!

Howard Abell · Answer

These are just small problems that need solutions. Real estate is a business of finding solutions.  If your current credit problem has not been a chronic one but recent and hopefully short lived than speak to that with a manager and owner. Lot rent is usually under 500 a month so the burden is not as great as renting a full apartment. If you have never had an eviction, stress that with whomever you speak to. Worse case get someone who might co-sign on a lease and who has good credit. You can offer a piece of the return on investment as an incentive. Stress to the manager or owner that you have no intention (at the current time) of moving the home. This might give some comfort.  Good luck.

Harold Anderson · Answer

Another thought about investing in a MH park.  Once you're in, if you spend much time there doing renovations, you'll get to know a lot of the neighbors who will give you a lot of the inside scoop.  Some will tell you how to do your business;-).  Some will give you tips about getting a free roof.  Some will show you their mobile home.  Most will want to see yours when you get close to done.  Some will show you how to deal with management.  One of my neighbors wants to buy mine.

Orlando Paz · Answer

@Harold Anderson - Sounds Like the deals presented by management comes with the added bonus of an education. With me, Craigslist is almost instinctual. Not necessarily my preferred method of looking for a mobile home though. I think that driving through the parks and jotting down phone numbers from For Sale signs, is another way good to reach out to sellers.

Harold Anderson · Answer

@Orlando Paz

The deals that management presented to me would have been great because they gave me valuable information that let me know how to get the best deal.  Unfortunately, my wife wants me to find deals closer to home so I passed on them.  I doubt you could get deals like that on Craigslist.

Harold Anderson · Answer

Orlando,

I'm not too much more experienced than you but I bought in a park that doesn't sell to investors so I suspect that all rules can be broken or twisted.  In my case, the park wanted to buy the same property I was interested in and didn't like investors.  However, after speaking with the MH owner, he refused to sell to the park and insisted on selling to me - for the same price.  The park had to go along with it.

Perhaps because I never see the MHP owners, I've developed a good raport with the park management and they've tried to get me to buy other homes in the same park.

As for credit, I don't know but it doesn't hurt to try.  If you had one credit event, your credit does improve over time.  If your credit rating is from poor management, you may have a harder time getting accepted.

Hai Loc · Answer

One thing good about Mobile Parks is you can find good deals with seller financing with good terms.. If you buy one with private water and sewer you need to do a bit more due diligence.

Ken Rishel · Answer

If the community owner has any real knowledge and understanding of how certain laws can affect them, they are going to want any Lonnie Dealer doing business in their community to be legal and compliant in their efforts. Otherwise they can be dragged into whatever mess the Lonnie Dealer might create. The smart ones will insist on verifying information supplied to them.

A Lonnie Dealer with lousy credit is a real risk to the community owner for many reasons. Knowledgable community owners are not going to risk doing business with them. In some states there could be Fair Housing issues with allowing a Lonnie Dealer to own homes in their community that could not qualify as a resident. Further, lousy credit is an indicator of other problems. That is why auto insurers calculate rates, in part, on what they see in a credit report.

Good credit and a professional and knowledgeable approach to community owners creates opportunity for Lonnie Dealers who know how to handle the relationship.

Any difficulties investing within mobile home parks?

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