Starting a small Mobile Home park

8 Replies

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.

Just the pure economics of starting/developing a MHP is not beneficial for most people as your hold period will have to be several years without any return...so unless this is okay with you and your okay with developing the land, bringing in roads, water/sewer, electric, cable/internet, developing the pads, and bringing in the homes, your going to be in the whole at least 20k-50k(includes home price) per pad before you even get this up and running to full or close to full occupancy.    If you can do it, all the more power to you and hopefully there is demand...

But you stating that they are developing MHP's in that area....i would do more digging and see if they actually are doing this....and if so..i probably wouldn't do that i would just wait to see how those parks fair and work out before i went and developed one...because once there is so much supply on the market, eventually it will cross over and there won't be any more demand for that much supply, therefor you will have concessions starting to happen in the market and vacancies go up...happens with apartments all the time at times like this.

Also most of the time there isn't enough demand in those areas that parks are being built because they are just in the middle of nowhere where people don't want to live.

Last year alone there was less than 10 MHP's built nationwide....if it was beneficial to build one all big investors would be doing it....most of the REITS are just adding onto existing parks because its much cheaper and they know there is demand in those areas

reach out for more questions if you have any

4 acres is large enough however based on lot rent it will take you a decade to see any profit. Initial cost is usually prohibitive when it comes to providing all necessary services to start up. You are talking 10 grand plus per lot in most cases which is high unless lot rents in your area are also very high.

Septic, roads, water, hydro, all up front costs with a very slow return. Time to fill lots can be considerable unless you have deep enough pockets to buy homes yourself to set and sell. 

@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.

@Adam Bradley To answer your questions, the best thing to do is get estimates on exactly how much this project will cost from local contractors. Get a few bids and opinions on what you can and can't do. Check with the county on any zoning restrictions. And yes, depending on the size of the homes there are other investors who've done the same with a similar size piece of land. Good luck!! 

Adam, what kind of rent can you get in Walker County for what your proposing? I would think that answer would go a long way toward helping you decide on a MH park rental business. Since it's a rural location, how easily do you think you can fill it with tenants in your location? "If you build it, will they come" - or not?

@Adam Bradley , I truly thought municipalities were no longer allowing new development of mobile home parks. If you end up getting this done I’d very much be open to interviewing you on my podcast so you can teach more people how you did it.

Very cool! I hope to hear more soon! Keep us updated!


Adam, I am in Tuscaloosa and am interested in doing a RV park. My idea is to market to Construction workers and charge them for lot rent. I would like to know how your venture turned out. How much did it cost you to develop the park? Once you got the lot developed did you take out a new loan? Any update would be great! 

Thanks