Buying & Funding Mobile Home Parks

16 Replies

Hi gang. I'm wondering if anyone could recommend a path to finding and buying my first Mobile Home Park. I'm seasoned in the Single Family Home market and am very interested in moving up to MHPs. I'm also transitioning to borrowing private money, short term to acquire them, and if I have to go out of state that will make at least three categories I'm new in.

I'm familiar with several courses such as Mobile Home University, etc and Loopnet, etc but would appreciate any feedback on them, or any other route to take in getting started. I'm ready to make a move but I want to make sure I have some idea of what I'm doing without losing my shirt.

I'm also curious how others fund them. How much do you put into the deal? How much do you have in reserve at purchase?  Can I expect to refi to payoff my private loan and get my capital out or is that not likely with MHPs? Any help would be highly appreciated!

attend the MHU bootcamp, listen to other podcast such as kevin bupps, jefferson lilly's, read other post about MHP's.

Many people take on a partner or two for the equity portion w/ some or all owner financing.  If larger than a $1mm purchase price, could be possible to do an actual syndication, or others have a fund that they started

brokers are the avenue right now, while off market deals still happen, they take a little longer and a lot of mailers to get there attention

Thanks @Rachel H. I’m planning on using a private money loan for the down and hoping to get owner financing, but either way I’d like to pay off the private money ASAP. Not sure if that’s an option via refi.

@Ryan Groene All great suggestions. Unfortunately I can’t attend the upcoming Boot Camp and going to these in general is fairly difficult for me at this point. I have listened to all the MHU podcasts as well as all the Kevin Bupps MH academy, and everything else I could find.

I’m looking to buy and hold for my personal portfolio, legacy wealth, etc so I’m avoiding partners, syndication, etc. Great suggestions, just not the route I’m going to take. I need to figure out how to do this without any long term partners.

I realize it’s going to be slightly more difficult but I’m preparing to make it work.

awesome. Don’t complicate the MHP to much. It is the same as any other form of real estate in terms of how to find, acquire and finance other properties. The process is the same. If you have money for a down payment somewhere then yes you don’t have to partner or take a hard money loan or private lender. 

Just be cautious that running them are a little different of a beast and you can’t just put in a propert management company and get away with it because there aren’t really any out there

@Ryan Groene This is what I'm concerned about different than SFH. I am using a private lender for the down, but where with a SFH I would refi the money out to repay the down payment, that doesn't seem viable with MHP. At least for a few years. Does that sound accurate?

I may also be looking at parks that are too big. I was hoping to get one in California where I live but they may just be too far out of my price point.

Finding a park anywhere in the country right now is becoming more difficult as a lot of attention is being put on the industry and there is only a limited number of parks out there.  so therefore driving up prices everywhere more than ever for things that come onto the market.  don't get me wrong, there are still plenty of good deals out there.  

it just depends on the type of property that you are looking at and getting going.  If its a huge turnaround it may take longer to get it stabilized. If you have something that  needs a little bit of work, then you could refinance fairly quickly if its stabilized and just needs some clean up.  Its definitely going to be a slower process for sure, that's just how commercial multifamily normally works. as there are multi units and things going on vs just one house.  

Definitely the refi strategy still applies, just a longer time horizon to do so.

I don't know what your looking at to determine if you are looking at something to large and i don't know what type of capital you have

@Ryan Groene   @Bukka Levy   I've heard great things about MHU and they actually did a good conf call on financing at different price levels. I've also been looking at MHP's. They are out there. 

Can either of you share your process for analyzing the numbers to determine an offer price?

general rule of thumb for most parks are lot rent * # of occupied lots * 12(annualize)=Annual Gross revenue

then multiply that by .6(if park pays water/sewer) or .7(if tenants pay water/sewer) to establish you NOI(net operating income). .6 and .7 are for 40% or 30% operating expenses.

Then divide that number by your cap rate you want, most people use 10% cap rate so .10 and you get your purchase price.

@Ryan Groene   Thank you for that. I've also been told that you want "NO" or very little "park owned" and the electric and water tapped to the city. What red flags should I look for regarding sewer and utilities as a whole that could end up being costly?

Also...if I find a park with no park owned and the tenants pay all utilities....are my expenses just maintaining common grounds, management fees and property taxes?

depends on your investment criteria.  public utilities are easy to mantain and less risky for most investors.  Private utilities are most costly, but can work and still make your MHP profitable...just due extra diligence and buyer beware in this one. Always get an expert on private systems

And yes for the most POH's are more management intensive and do cost more to upkeep...but some people find this appealing and prefer this way...i don't and most people in the industry don't.

Your cost will also be insurance, some general area potential electricity, cell phone/office supplies for manager maybe, reserves, bank fees, legal fees, accounting fees, software fees.  Trying to give you more line item approach

Firstly it all depends on the park. We recently finianced a mixed use mobile home park in the Central Valley I would say b,c class. The subject for many reasons will never get bank/lender financing however it it a value add cash cow. On this park the right financing is a long term hml loan that fully amortized. They are out there. Let me know if you would like a referral of realtor that specializes in them.

Originally posted by @Ryan Groene :

general rule of thumb for most parks are lot rent * # of occupied lots * 12(annualize)=Annual Gross revenue

then multiply that by .6(if park pays water/sewer) or .7(if tenants pay water/sewer) to establish you NOI(net operating income). .6 and .7 are for 40% or 30% operating expenses.

Then divide that number by your cap rate you want, most people use 10% cap rate so .10 and you get your purchase price.

Is a 10% cap rate realistic on a 75+ occupied lot park realistic? All the parks that I see are 7.5-8% at best.

cap rates don't always tell all....technically you could buy something with no cap rate if its losing money and its a turnaround park.   

the 10% cap is an old general rule that people based their initial quick back of the envelope evaluation to see if its worth pursuing more without spending any more time on it.

but yes it could realistic to see that depending on a number of variables

I'm looking at a park that's about 75% occupied. It looks like it's about a 10 cap at its current income and 40% COC with 25% down and owner financing the balance. It seems like it has a lot of upside. I'm just not sure what else ai should be looking at numbers wise. Still waiting on some info regarding utilities.

I feel like I’m aiming to big for my first park but I also don’t want to be afraid to jump in.

I probably need to calm down and do more “paper trades” but assuming I was serious about this do these numbers mean much or am I missing a ton of info?

in order to get a better picture, i would need lot rent, what type of utility set up, how many Park owned homes, 

also keep in mind their numbers are not always worthless, but make sure you do your own pro forma