I know Frank says not to build a park but...

20 Replies

I my area of Appalachia, mobile homes are pretty standard. Unfortunately mobile home parks can be super small, haphazardly compiled, and in great disrepair--but not for sale. This area is not a beautiful, tourist area; although there are touristy sites a few hours from here. 

I actually lived in a mobile home (and mobile home park) for several years when we first moved to WV. The park has since expanded due to demand but it is decently far out in the country. However, to some degree, the people of this area expect to drive a while and living a little bit in the country is sometimes coveted. 

Is there any set of circumstance where it would be a good idea to build a park?  Maybe in a really good school district near nicer/newer homes? 

Thoughts?

Frank and Dave have a different focus. That doesn't mean it's not a great idea!!!  I say go for it 

Thanks @Leslie A. I have been thinking (and talking about building a park) for years and even sorta planned one years ago with my father.   I think there is opportunity in my area that may not be in some of the other parts of the country but I don't want to make a huge mistake...

It can definitely be worth it if the numbers work for you.  I'm seriously looking at building one near Houston while it's still possible.  We're seeing some parks being run out of business and another large one just sold for land for new development so there could be the perfect time for me to build one.  I also just found an owner of some unrestricted land who is willing to owner finance with no money down!  

Remember Frank has a very different model and it works well for them but everyone needs to figure out what works for them given their location and situation.  That's what I love about real estate; there are thousands of ways to make money.  You just have to decide what your niche will be and go for it.  Good luck!

Buying an established operating park is a different business than development.  There is a tremendous amount of risk in development.  Its going to cost a lot more in required capital and a lot of the best locations will make it challenging to do if you can even make it prohibitive.  I don't know what development costs are exactly, but you can buy empty parks for substantially less than what I would estimate development costs are .  When you can do that, why would you want to go through it.  

I can think of almost no angle where it makes sense. Im sure you can be the one off person succeed but why go through all that struggle when there are 5 better paths? 

I would first check with and discuss this matter with your municipality or authority having jurisdiction. You might be in for some challenges as there is no real established method of zoning for mobile home parks in many municipalities due to the nature of mobile home categorizations as a vehicle more than standard housing units. There are also restrictions in place to prohibit the expansion of existing mobile home parks. I would start with my municipal authority before devoting too much time and effort to plan a mobile home park. 

Gilbert has it.  It's not whether you want to build a park or not.   Municipalities don't want more parks.  Go to your county commissioners and permittinng offices and start asking.

Dave has shown the math to build a park is a folly compared to buying an existing park.  Cost of land, septics, water lines, power if the elect company won't run lines and meters for free etc.  Cost per pad ads up.  But 99.9% you won't get the permits.

I have been considering building a very small one in my town.  The zoning is already there.  The place I am looking at is 1.5 acres and I was thinking of 4 to 6 pads.  I would like to live in a small community so it appeals to me. My motivation would be not only income, but also the ability to make a nice little community.  There are no parks for sale in my area either.  

Thanks for all the input!

The second owner of the park is the one who makes the profit. The only mobile home park builders I see operating these days are companies who also manufacture homes. They have the ability to create much bigger profit margins than you would ever be able to generate building out the infrastructure and trying to sell homes yourself, or worse, just rent spaces. If you expect your prospective tenants to drag new homes onto your lot, in a non-touristy, non-retirement community, what is the average household income in your area? Even a used home bought at a great discount is going to cost $5,000+ to move, block, strap and level. 

Based on how you describe your area, I'd focus on buying homes on their own land at big discounts, with seller financing, and renting them out. 

Originally posted by @Shelli Callan :

I have been considering building a very small one in my town.  The zoning is already there.  The place I am looking at is 1.5 acres and I was thinking of 4 to 6 pads.  I would like to live in a small community so it appeals to me. My motivation would be not only income, but also the ability to make a nice little community.  There are no parks for sale in my area either.  

Shelli,

Are you saying there are no parks in your area?  Just to clarify, most things are for sale but what you maybe meant was not "listed" .  Striking up a conversation with those park owners can lead to potential opportunities so keep that in mind :) 

Jack, you are correct there are no parks "listed" and I keep forgetting to remember that doesn't mean they are not for sale.  Thanks for that reminder!

Developing a park for mobiles is no different than developing a residential subdivision, except the profit margins are less. There's still the same costs for putting in utilities, roads etc.  As Aaron mentioned, unless you plan on doing something where you put in the manufactured homes that would bring in higher dollar tenants, it would be very hard to justify the cost. , and even then, unless it was a very large park to spread those costs over, it probably isn't going to pencil out. 

Sometimes when people picture doing development, in their minds it seems so simple, because they visualize what will be sitting there in the end. The reality of development is that the majority of the project happens before anything is ever sitting on the top of the dirt, and that takes a large portion of any projects budget. So though a mobile home park seems simple enough, they're like anything else. 

@Karen Margrave

And there we are, words from a developer :)

There is a post somewhere here that @Ken Rishel made about developing parks/ buying established parks and the verdict was that buying parks is probably a better idea than developing them.

So again, can you do it? Sure but why not follow the path of lease resistance :) 

@Jack Baczek

Great comment, everything is forsale every day of the year (my addition).

@Shelli Callan

Put up a test ad in craigslist.  Frank (of Frank and Dave) always runs test ads before buying a park.  Or you building one.  Talk to the folks who reply.  Get to know them and their needs and ferret out their issues.  Good to look before leaping.  :)

Clayton homes has come out with very interesting terms for placing cheaper homes on your lots via several plans from zero cost to you to some cost.   But permitting, septic, water, electricity, roads will all be costs you have to put in a the least.

Originally posted by @Jack Baczek :

@Karen Margrave

And there we are, words from a developer :)

There is a post somewhere here that @Ken Rishel made about developing parks/ buying established parks and the verdict was that buying parks is probably a better idea than developing them.

So again, can you do it? Sure but why not follow the path of lease resistance :) 

 Since I was quoted, I guess I better jump in...

I started developing communities from scratch in 1975. Over the years I built 9 communities. They had some things in common:

  • All of those communities were upscale (5 star). 
  • All of them utilized multi section homes (even in 75) that were top of the line
  • All of them were set with "low profile sets" (pit sets, residential sets, whatever you want to call them...)
  • All had professionally run intensive marketing and sales campaigns that generated lots of high gross profit sales quickly. (Very important to creating another revenue stream to help pay down the debt.)
  • None of them deliberately drew residents from the local area.
  • All of the marketing was aimed at promoting a lifestyle rather than the cheaper price of homes.
  • All of the communities were planned for 600+ sites. ( I sold some communities before we reached that number.)
  • All of the financing of the homes was through a captive finance company which captured another income stream.
  • All of the money to finance the development came from a general partnership rather than institutional lenders which allowed us to do things better because of a lack of demands an institution might have made.
  • The three communities in Florida were retirement communities that were direct marketed to snowbirds in the upper midwest during December, January, February, and March. All the others were aimed at upper middle income families who worked and lived in very expensive areas and what we offered was a single family home in a good school district they could actually afford if the principal breadwinner was willing to commute.(This was before women were becoming major breadwinners.)

I think this was the pattern of most of the developers at the time, and the only way other than "Mom and Pop" developers that development could work. Certainly it was the method used by Del Webb, who was doing mobile home parks before Sun City, and the DeAngelo brothers, and Maurice Wilder, my first partner. 

With all of that as known requirements to develop successfully, the resources, knowledge, and ability are very important. Developing is daunting. On the other side of the equation was Bud Zeman, once the largest non-public community owner in America, and Sam Zell, the mastermind who discovered mobile home parks as a real estate investment by reading George Allen's first book: How to Find, Buy, Manage, and Sell a Manufactured Home Community and then hired George as a consultant to teach him what he did not know and then went on to create a Real Estate Investment Trust to finance the purchase of existing communities. Both of these men would have (Bud is deceased) contended that there is more money in buying existing communities than developing communities. Most of the new young lions like Ryan H., Ben B., Ken & Katie, Fred B., Scott & family, Four Leaf, Inspire, Matt F., are in full agreement with that and are buying investment grade properties where ever they can find them at prices that make sense. The largest publicly traded companies like UMH and Sun, and Sam Zell's group, ELS, are doing just that as well.

My final thought is this. In an underserved area, a young person building for the future might want to consider developing a community if they have what it takes to oversee such a venture. Unlike a previous poster, I think the long-term returns are far better than other real estate developments. Most however would be better served by learning what they need to know to buy and manage existing communities.  

@Ken Rishel  In the communities you developed, was the land all leased to people owning their own manufactured homes, were parcels sold, etc.? Place the manufactured houses yourself and lease up or ? 

At one time we looked into developing a community whereby the lots were sold to people wanting to own their own property. Unfortuantely, because of some environmental issues on the land, though it at one time had been approved for such a development, it became unfeasible. 

There are parks here in southern California where the houses (older) are priced at a million dollars, because of ocean views, etc.

At the same time, in areas that have lower income wage earners, it seems like now might be a great time for new parks to offer affordable living, where buyers can't qualify for traditional homes, etc. 

Your thoughts? 

Also, while you're at it, can you explain what it is your company does? I see that you help with "chattel" financing. Most of us are familiar with "real" property, but have dealt rarely, if ever with chattel, maybe you could give us a quick education? 

Originally posted by @Karen Margrave :

@Ken Rishel  In the communities you developed, was the land all leased to people owning their own manufactured homes, were parcels sold, etc.? Place the manufactured houses yourself and lease up or ? 

We would never sell the dirt - that is where the money is.

At one time we looked into developing a community whereby the lots were sold to people wanting to own their own property. Unfortuantely, because of some environmental issues on the land, though it at one time had been approved for such a development, it became unfeasible. 

I am aware of a few developers who tried this and it almost always became a nightmare. In some cases, not only did the developer go broke, but the people who bought into the concept were also left with a very expensive mess.

All of this is, of course, different than developing a true subdivision using HUD Code homes. There are people doing that with varying degrees of success.

There are resident owned communities normally set up with "common ground ownership", but they are almost always communities that are already in existence where most (if not all) of the residents hire an outside group like ROC to help them buy and finance the community from the for profit owner. In my experience, many of the residents who have done this often wish they had not. Fees from the management companies are often higher than what they were paying the for profit owner when the cost of dirt is subtracted from the monthly site rent.

There are parks here in southern California where the houses (older) are priced at a million dollars, because of ocean views, etc.

Don't forget about rent control adding to the value of the homes. The homes are older, but heavily remodeled so that the owners qualify for the government mandated manipulation of private property.

At the same time, in areas that have lower income wage earners, it seems like now might be a great time for new parks to offer affordable living, where buyers can't qualify for traditional homes, etc. 

If you are talking about California, because of all the regulations, I'm not so sure. Elsewhere I would agree.

Your thoughts? 

Originally posted by @Karen Margrave :

@Ken Rishel  

Also, while you're at it, can you explain what it is your company does? I see that you help with "chattel" financing. Most of us are familiar with "real" property, but have dealt rarely, if ever with chattel, maybe you could give us a quick education? 

I need to try to stay within Bigger Pockets guidelines.

Our company is a nationwide consultancy to lenders, and those who want to be lenders, engaged in purchase money finance of manufactured homes using the title as collateral for the loan. Our clients and customers are banks and credit unions who need help with operational issues like creating lending policies and procedures and credit matrixes for underwriting, specialized servicing procedures and specialized collection and recovery procedures. The point is to lower repossession rates and increase collateral performance to increase net ROI on the loan portfolio.

We also work with community owners and retailers in the manufactured housing industry to help them set up their own captive finance company or to help them with other alternative seller finance solutions that are legal, compliant and workable. We also help with sustainability issues including the raising of capital with which to make loans.

We have a large number of clients who already had a finance operation prior to the SAFE Act and the Dodd-Frank Act who need help making changes to their operations so that they are legal and compliant.

We also work with Lonnie Dealers to help them change their operations related to finance to be both legal and compliant.

Since there have been changes in federal law that now require communities and retailers who do NOT lend to have Compliance Management Systems in place and operational, we have modified a CMS we developed for lenders for community owners and retailers for their use as well.

Feel free to check out our website - (Edited out by moderator) 

@Ken Rishel

Great info on the resident owned communities.  

@Ken Rishel

 Thanks for all the information and detail. It's always fun to learn about other niches in the market. Though you're right, because of regulations, California is very hard to do anything and come close to calling it affordable.  

Also, I had to edit out the website, but people can message you or check out your profile to get there. You might want to consider becoming a paid member and have your website address in your signature 

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