One larger park or 3 small ones?

Question

Hi Everyone, I am new to mobile home park investing. I need some advice on whether it's a good idea to buy a few small parks or one large one. My thinking is maybe diversifying in 3 states would be a good thing in case of natural disasters. Also I would gain more experience with deals this way. But one larger park might give me more income. Any thoughts or comments would be greatly appreciated.

Jeffrey H. · Answer

In general larger Parks have lower expense ratios, but starting occupancy is a major factor.  Larger Parks are easier to sell as well.

Still, run the numbers.

James Mc Ree · Answer

Consider if you want to perform property management across 3 states and pay 3 states' worth of income taxes, versus 1 location and 1 state.  It doesn't seem like you get more beneficial experience from leasing 3 locations of 50 mobile homes each versus 1 location of 150.  3 Locations probably will consume more time.

Jim.

Patrick H. · Answer

I Agree,  crunch the numbers first.   Then look into the loss of business income with your insurance agent for the natural disaster.

Derrick W. · Answer

crunch numbers!!!!!!!!!!!!

You cannot buy based on size without knowing what your cash flow will be.  Get a calculator and base your decision on numbers.

Jeffrey H. · Answer

Even small MHP's < 20 units are competitive with multifamily investments, so the short answer is yes they can be good investments.  Financing them can be difficult.  You're basically limited to small banks, private money, or owner financing.  And in many cases if you're running like a 10 pad Park your monthly income after debt service will be something ridiculously small like $500 depending on the size and terms of your loan.  Expense ratios between 40-50% with full occupancy and city utilities.

Small Parks won't let you leave your day job, but at the right price can be a good way into the business, have tenants pay for the property, and realize land appreciation over time.  Once you prove your ability to operate or turnaround a defunct MHP you can find outside investment with that track record in another larger investment.

Jena Liberty · Answer

Hi Andrew, just on the surface I would say the answer depends on at least a couple of factors. 1) what is your reason for investing - buy and hold or fix and sell. 2. How will you finance. Debt service is not included in net income figures and eats away a lot of profit. Smaller parks may not generate enough income to cover debt and your desired income.

I was looking at buying several small parks but am now just focusing on buying the largest park I can afford with the best numbers I can find.

There are super savvy people on Bigger Pockets. Hopefully some will reply to your post for a more full understanding.

Jena Liberty · Answer

Thank you all for your comments. I am seeing that a larger park would be the better use of time and exit strategy.

One larger park or 3 small ones?

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