Creating your own MH park from scratch (raw land)

21 Replies

Hi,

I own 36 house lots (65x1250) in East Texas. They are platted as 3 whole city blocks. They are in a small city but on the far edge of the main part of the city. Most here want to buy MH parks that are already up and operating. I'm thinking about clearing this land and starting a MH park from scratch.

Is this "wise"?

Anyone know of a good book or website on such a thing?

Thanks,

PM

Originally posted by @Petit Morne :

Hi,

I own 36 house lots (65x1250) in East Texas. They are platted as 3 whole city blocks. They are in a small city but on the far edge of the main part of the city. Most here want to buy MH parks that are already up and operating. I'm thinking about clearing this land and starting a MH park from scratch.

Is this "wise"?

Anyone know of a good book or website on such a thing?

Thanks,

PM

 To the best of my knowledge, there are no books or websites for this. The reason most people shy away from it is that it takes a great deal of knowledge and expertise they lack to develop, not to mention access to a great deal of long-term capital.

Unless you were doing the actual blue collar work, you could not make such a project work as it is too small to afford to hire such work done.

@Petit Morne , have you done any research at city or county for ordinance or zoning and planning?  that would be the first step.  Finding a JM to help with the development into whatever is best use could help you with the big stuff.  Good Luck and keep us up to date on your venture.  

@Petit Morne Depending on the city, and if it is in the city limits, they may not allow new mobile homes or they may not allow you to hook into the city water/sewer if the zoning isn't right. Where is it located? 

Frank Rolfe of Mobile Home Park University, who is the 6th largest owner/investor in mobile home parks in the US according to Wikipedia, advises against developing a new mobile home park. I heard of Rolfe's books on mobile home park investing because it was recommended by one of the BP's guest speakers. Here is the link to his advice:

https://www.mobilehomeuniversity.com/articles/why-...

I have started reading one of Rolfe's books and finding it helpful.

I assume you want to put in more than 36 units?  Also did you mean each lot is 65x125?  Zoning rules will be VERY important to your effort.  Find a local real estate attorney (hopefully one with city council and county ties) .  I think redeveloping old lots for off-site built structures is going to be a thing. Good luck and keep us informed.

@Joe Splitrock   The world certainly does need more affordable housing.  Off-site built structures will be an important part of that as they are more efficient to build and thus more affordable.  Its not about how its constructed but about how its maintained.

Originally posted by @Roy Oliphant :

I assume you want to put in more than 36 units?  Also did you mean each lot is 65x125?  Zoning rules will be VERY important to your effort.  Find a local real estate attorney (hopefully one with city council and county ties) .  I think redeveloping old lots for off-site built structures is going to be a thing. Good luck and keep us informed.

@Joe Splitrock  The world certainly does need more affordable housing.  Off-site built structures will be an important part of that as they are more efficient to build and thus more affordable.  Its not about how its constructed but about how its maintained.

Anyone who has tried to renovate a 30 year old mobile home versus 30 year old house will agree the fixed structure house is constructed much better. In my city the worst schools and lowest value neighborhoods are directly tied to mobile home parks. Probably because it attracts the poorest people in high concentrations. Cities do much better if they disperse lower income housing more evenly throughout a city versus building large mobile home parks. I don't see most mobile home parks well maintained. Low income residents just don't take care of things. When someone can buy a mobile home for $7000 and pay $400 lot rent, they are not exactly heavily invested in keeping the property high quality.

There are some mobile home parks are better maintained than others. Newer parks that contain more expensive mobile homes are better, but my guess is the older run-down parks are more profitable for an investor.

@Petit Morne It takes time and a lot of money to build one from scratch. Though, I do know others who have placed homes on land with existing infrastructure in place (i.e. plumbing, electrical, etc). If you have the network and know the right people, it'll definitely help. Good luck! 

If you are looking to develop it and then sell it to an investor, I don't think you will make your money back.  It takes a lot of capital and time to develop one from scratch

Recently attended the SECO (SouthEast Community Owners) conference in Marietta GA. Only two people out of appx 300 attending were interested in developing new mfd housing communities. I am one of the two. My reasons for pursuing this type project rather than another single family detached subdivision are too many to list. Suffice to say I've been involved with enough residential and commercial development to learn how NOT to shoot myself in the foot. And, over the past 5-6 years I've studied the subject carefully in an attempt to learn how to make a new mfd housing project viable. I believe I have devised a winning strategy. We will be self-financed, developing property that is zoned "by-right" for the intended use, using public water/individual septic tanks, constructing DOT spec roadways, installing concrete sidewalks and offering high-speed cable TV and internet service. Homes will be new 16x80s or 32x80s on 10,000 SF lots. And there are a few other key development/operational details I choose to not divulge. Plan to release civil engineering firm to start site planning process in early January. Entitlements will take 4-6 months so site work should commence early to mid-summer and first homes installed by early fall. Will be attending SECO 2018 to provide update on project in case anyone is interested.

There is the saying in the mobile home park community, "The second owner makes all the profit." 

It makes no sense whatsoever to dump tens of thousands of dollars into a lot that will produce $400+- gross income.

@Russ Wallace , I suppose there may be a situation/market where developing a new MHP would make sense.  Generally speaking, wouldn't it be best to buy an existing park with homes and paying tenants for say $20K per lot?  I speculate developing a park will cost some $15K to $20K per lot and at that point you only have empty spaces.  This doesn't even account for the cost of the land.

This subject comes up every two weeks or so in this forum.  Most folks bringing this up happen to have land available they'd like to utilize.  It's been suggested that perhaps other land uses may be more attractive, like constructing self-storage facilities.  It would likely be easier to get financing from a lender to develop a self-storage facility, than to develop a new MHP.    

Please keep us posted.  

@Russ Wallace , I may be person #3!  There are definitely places and situations where developing a park makes sense.  MHPs are one of the highests ROIs in real estate investing.  There is a finite number of existing parks and more and more cities don't want them but they fail to understand the tremendous need for this type of affordable housing.  Not to mention that manufactured home building techniques continue to improve.  

And, yes, I did write an eBook called "So You want to build a MHP".  There is a ton of due diligence you will need to develop a park and it could take two years or longer before you start to see cash flow and returns but for the long-term I think they are a good bet.

Texas only allows 7 homes per acre state wide and there are further limitations on well and septic vs. municipal utilities.  

@Aaron Mazzrillo I disagree with the first sentence and agree with the second. First, real estate development (when done properly) is effectively a wholesale cap rate investment play. Why buy a ~30 year old MHP at a retail rate if a new one can be built for a wholesale rate? Secondly, DCFA will prevent that from happening. That's one of the reasons it's taken years to devise the strategy. Lots of impediments to eliminate, mitigate or incorporate, a practice based on another well-worn adage...."when eating an elephant, take one small bite at a time".

@Jeronimo C. You're correct; our decision to pursue developing a new MHP is based on demographic data and economic employment analysis (aka, base employment analysis) which, when coupled with other specific reference points, clearly indicates an opportunity. The cost to develop a pad depends primarily on the jurisdictional authority's land development ordinance (LDO). Some are carefully worded so as to make new development infeasible. But, all LDOs are not written in the same manner. My tip: spend enough time studying one to realize a narrative that can evolve into a concept which can be refined with continuous DCFA into a viable project. 

@Belinda Lopez One of the first items on my MHP development checklist was to investigate the quality of the new housing that's available today. I've toured mfg facilities for national brands and one-location companies that produce HUD and modular products. And I was surprised to learn a select few companies have prioritized quality over quantity. These mfrs use #1 and #2 grade framing lumber to build floors/walls/ceilings in jigs that yield panels with very tight dimensional tolerances. Some are even building HUD homes with 2x6 exterior walls, radiant barrier roof decking, a full house moisture barrier, low-e vinyl windows, extra roof/wall/floor insulation and high efficiency HVAC systems. And big money has taken notice. Marriott, Google and Equity Residential have all begun to embrace manufactured housing.

Originally posted by @Russ Wallace :

@Aaron Mazzrillo I disagree with the first sentence and agree with the second. First, real estate development (when done properly) is effectively a wholesale cap rate investment play. Why buy a ~30 year old MHP at a retail rate if a new one can be built for a wholesale rate? Secondly, DCFA will prevent that from happening. That's one of the reasons it's taken years to devise the strategy. Lots of impediments to eliminate, mitigate or incorporate, a practice based on another well-worn adage...."when eating an elephant, take one small bite at a time".

 I've been in the mobile home industry for many years and I don't know one person/company doing development. Maybe you know something they all don't. You just might be the next Elon Musk of mobile home communities... but I doubt it. 

I do wish you luck on your endeavors, but please update me with the address of any property you start development on. I'd like to be 1st in line for 2nd ownership.

@Aaron Mazzrillo   I have never developed one but have repositioned 4 of them. and quite profitable.

absorbtion is always the killer and of course were I was working Oregon WA CA the cost of the dirt made these non starters day one.

out in the areas they are talking about where the price of properly zoned dirt is a fraction of what we pay.. I suppose it may work if you have a burning desire to do it.

my partner in my airplane is doing something similar in Oregon he started a tiny homes manufacturing company ( making his own) and he owns a nice chunk of properly zoned dirt in Oregon 10 acres .. its worth about 3 million as it sits.. but he is going to sell the tiny homes then do 50 year leases on the under lying dirt so in essence create his own park as it were.

But he has the Dinero to follow his whims and social desires of creating affordable housing for the mass's. 

Class A parks are pretty hot.. I did business with the Dougher family down your way they own 5 thousand spaces in Orange county free and clear.. I suspect they are doing all right  LOL. 

@Russ Wallace thanks for replying to the various posts.  Most other people asking this question disappear without sharing what ever happened to their vision of developing a MHP.  I think you make a great point about the benefits of manufactured homes.  People will start realizing  manufactured homes can be of superb quality and exceptional price.  It is just a matter of time before houses are built like Legos.  Cross Laminated Timber is just getting started in the US and it could change the residential construction industry (http://weberthompson.com/blog/wp-content/uploads/2...   ).  However, I am sure you agree manufacturing quality is just a small element of what goes into the decision process of developing a MHP.

It seems from your responses you believe developing a MHP can be a profitable under some circumstances.  Can you share more about when developing a MHP make or does not make sense?  In particular, can you share your views on the financing side of things.  It is hard for me to see the numbers working out on return on cash and/or financing.    

Would developing a MHP only make sense in:

  1. Hot real estate markets, where home prices are high?
  2. Large parks (i.e. over 150 lots)?
  3. 55+ Communities?
  4. When const to develop pads is _____ $/Lot?

Last, if the point is to make the best return on your investment, why not utilize bank financing and develop a self-storage facility instead?  This is a proven model and from what I gather, the returns are very good.

Please continue sharing.

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