Starting a small Mobile Home park

[Adam Bradley]

I have 4 acres in Walker county, Alabama, outside of any city, just "in the county". I'm considering packing it tight with MH lots and renting them out like a MH park. (What's the difference between a MH Park and a just bunch of MH lots together, I don't know)

Around this county, MH lots are gravel and a concrete pad is nigh unheard of.

There are currently other new MH parks starting up in Walker county.

I'm just curious as to the pitfalls of starting a "park" (or just a bunch of MH lots with power and water with meters) on my 4 acres.

Obviously, I'll have to pay for the following:

- any leveling of land, which is mostly level already

- gravel drives from road and for lots

- water run and metered to lots

- electricity run and metered to lots

- septic systems for each lot

Any input like "DON'T DO IT! 4 ACRES IS TOO SMALL!" or otherwise?

Thank you very much for the information.

[Bill F.]

@Adam Bradley

The first question you need to answer: What is your property zoned for? Each zoning class has its own density restrictions and your land may or may not be zoned for MHPs. So that's the difference between a MHP and "a just bunch of MH lots together" 

This will drive how many lots you can have. At most you are looking at 10 homes/acres and you can use 3 acres (the septic needs to go somewhere and assumes you can have a group septic). That's 30 lots.

Second question: If you want to have a horizontal apartment building, why not just build an apartment building? At least that will have some resale value. A MHP with all POHs has very few buyers and when they do sell, they have significantly higher cap rates. 

Third: What will the capital requirements and returns look like? Do you know much it will cost you per pad to develop in your area? And that is before you put a home on them, assuming you can find enough homes. Frank Rolfe talks about why its not a good idea.

Now can you do it for less? Sure, you don't need a package plant, but you'll need a well and septic (will both need to be maintained and inspected at least quarterly) Rough guess you can make it for $15k per lot, or $450k. Now you need homes, which installed and fixed up, run you another $15k/home. That's $900k-$1m range for the MINIMUM capital you'll need. All this seems like a lot of work for less than half of $600/month rent, or around $72k/yr.

Now what's it worth if you can sell it? The park valued off NOI ($200 lot rent *30 lots*12 months* 50% expense ratio= $36k NOI) at a 9 Cap that's' worth $400k. The home's aren't worth $15k since they've had renters in them.

Spending $900k to make something worth $800k doesn't make a lot of sense to me. All this leads me to the conclusion that this has to be a LONG (20+yrs) term strategy, where you will self manage and live off the cash flow.