Mobile Home Buying Qualifications

4 Replies

What type of buying credentials do you have for a mobile home park? What are you looking for? What type of CAP rate are you looking for? How do CAP rates for a MHP compare to an apartment building for instance?

@David Whartnaby Not 100% sure on what "buying credentials" mean but I'll give the tried and true 'it depends'. 

If you want to buy a 10 space park in the middle of no where, all you need is like $30k for a downpayment/OpEx and the ability to convince the seller to carry a note. If you want a 400 space park on the FL coast, you'll need to have broker/seller connections, a proven track record, and a bank role/investors. 

Cap Rates tend to be higher in MHPs than apartments, but again it depend. The 10 space park could sell at a 15 cap but the 400 lot park could sell at a 5-6 cap. 

Cap rates don't follow any hard and fast rules, but are  representations of the assets' "risk" and thus the return that is given to the buyer.

I look for a deal. That could come in many forms such as low price, seller finance, low down payment, low rents, opportunity to submeter utilities, opportunity to add homes, etc. I also look for city water and sewer. A larger metro area is preferred by most investors, but if you are comfortable with the local economy and demographics you may find a lower valuation by looking there. 

Cap rates for MHPs should be about 3% higher than apartment complexes.  20% cash on cash should be fairly achievable if your cap rate is 3% higher than your loan rate and if you can get 20% to 30% down payment. 

Last, larger parks are better (economy of scales).  50 lots would be a great size. 30 is ok. 15 is hard to make work, unless you manage it yourself. 

Feel free to reach out to me. I own a park in neighboring Montana. 

Old school investor. I total the rents subtract the known expenses and add another 10% for surprises. If it still cash flows I am interested. One thing to factor in is the age of the park. How old are the water lines? Lots of tree roots to tear them up? How about the electrical services. still above ground or have they been updated and placed below the ground. Park Full? Has the local factory just closed? Where do the current residents work? There is more but perform your due diligence.