How is a typical Mobile Home park purchased with park owned units? I am thinking of purchasing the land via a realtor and then buying the trailers directly from the owner. Is there a problem with doing it this way? Is it even necessary or a good idea???
I hear from the nationwide park owners that there hasn't been a new park permitted in a long time. Your first stop is with your county commissioner, zoning board etc. Practically a zero percent chance you'll get the permits.
The next issue is the economics. Lets say a park build out looks like:
- $20k per pad for septic, water and possibly electric poles and lines. This is probably low
- Home: $30k are the cheapest park homes you can buy. The Mfgers are offering several packages to place homes in your park at low cost. But the financing from the mfg (clayton, century21) takes some of the rent in one case, to all the rent in another case. So your park will have low NOI for 3-5 yrs.
- add in the cost of land, permits, roads
Today you can buy existing MHPs for a fraction of building new infrastructure, so no one is even trying to build new parks. The economics just don';t make sense then the impossible permitting situation.
It's counter intuitive: parks with very old homes cash flow much better than parks with newer homes then parks with brand new homes. Debt payments kill the cash flow. Go look for parks with very old homes that have been kept up.
Park owned homes still just rent for $450-$650 which doesn't leave much for debt service given the damage, and upkeep needed.
Most deals I have worked on have one entity that owns the land and another entity that own the homes. Although I couldn't tell from your post, it sounds like the park is already developed but you're trying to figure out how to buy it? In that case a commercial broker should be able to help you buy the entire property with the homes.
Let me know if that answered your question.
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