Filling Out and Turning a Medium Sized Park in a Small Town

Mobile Home Park Investing
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Filling Out and Turning a Medium Sized Park in a Small Town

Jacob Brattain
SHELBYVILLE, IN · Member since 2017 · 19 posts · 7 votes

Hello All,

I'm going to look at an out of state mobile home park this weekend that I know is in pretty bad shape and only about 1/3 full.  I have SFHs and a few small apartment complexes, but this would be a first for me.

Quick run-down:

  • 45 lots, with no room to expand
  • 18 full - 15 POH and 3 paying just lot rent
  • Public Utilities, proper zoning, paved streets
  • Small town, around 45 minutes from any sizable town; around ~2,500 residents that are mostly blue collar, lower income
  • I believe lot rent should be around $250-300 per spot once full and stabilized
  • Current asking price is around $200k, with expenses running around 35-40% of gross income

My initial plan would be to give all POH to the current tenants if they agree to re-sign lot leases and update all utilities and other facilities as necessary in order be prepared for additional homes being moved in. 

 I'm mostly worried that it would be difficult to ever fill the park out and capitalize. Has anyone had experience with getting home manufactures to set demo units on lots and offer to finance them for new tenants?  Any other suggestions to turn the place around?

Thanks in advance!

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John Jacobus
Investor · New York, NY · Member since 2016 · 224 posts · 333 votes
7y

In small towns, you need to make sure there is demand for the kind of housing available in your park.  It’s not a foregone conclusion that you’ll be able to fill the vacant lots.  I recommend that you run test ads in the major paper and on Craigslist at your desired monthly lot rent to determine if there’s interest.  You want at least 30 calls over a 10 day period.  If you come in lower than that, I would not only be concerned about your plan to fill the vacant lots, but also about the overall viability to keep the park occupied and push rents.

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  • Ed Emmons
    Specialist · Milford, ME · Member since 2016 · 630 posts · 378 votes
    7y

    Century 21 cash program can fill your lots. Why would you want to give away the better part of your cash flow? Are the homes in bad condition? I have had parks where I have owned most of the homes and others where I didn’t. I realize most people are saying that owning homes is bad. I would agree if the area only brings in $450 to $550 for trailer rent. In my area it is $650 to $1150 depending on whether utilities are included. If the area has a significant population decrease over the past 10 years, you probably won’t ever fill your lots.

    I have purchased parks in poor condition and I figure 2 years to turn them around but you need a pool of possible renters or owners to pull from. Look close at the other infrastructure too as repairs can be costly.

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  • John Jacobus
    Investor · New York, NY · Member since 2016 · 224 posts · 333 votes
    7y

    In small towns, you need to make sure there is demand for the kind of housing available in your park.  It’s not a foregone conclusion that you’ll be able to fill the vacant lots.  I recommend that you run test ads in the major paper and on Craigslist at your desired monthly lot rent to determine if there’s interest.  You want at least 30 calls over a 10 day period.  If you come in lower than that, I would not only be concerned about your plan to fill the vacant lots, but also about the overall viability to keep the park occupied and push rents.

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  • Jacob Brattain
    OP
    SHELBYVILLE, IN · Member since 2017 · 19 posts · 7 votes
    7y

    @Ed Emmons Unfortunately the trailers are in pretty bad shape. There's only around $150 additional a month for trailer rent over base lot rent, and I think that would be swallowed by maintenance costs quickly.  

    Population is stable, but I'm not sure there would be any significant changes of growth in the near future.  

    I'll look into the Century 21 cash program, thanks for the suggestion!

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  • Jacob Brattain
    OP
    SHELBYVILLE, IN · Member since 2017 · 19 posts · 7 votes
    7y

    @John Jacobus Test ads are a great idea! thanks!

    If the initial infrastructure tests are promising, I will absolutely use the ads while I'm doing other due diligence 

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  • Mike G.
    Real Estate Agent · Las Vegas, NV · Member since 2016 · 589 posts · 275 votes
    7y

    @Jacob Brattain

    if the lot rents are that low then that is a reflection of the quality of tenants inhabiting that park. I would be weary to fill any vacant lots with new trailers from the Century 21 cash program as at that lot rent rate it will take forever to pay off those floored units and the interest and curtailments will eat you alive. Not to mention of the tenants beat up the current mobile homes that bad, then they will destroy these new homes from the cash program long before they are paid off which is a bad investment any way you slice the pie. 

    I would look at other parks and see of they have homes you can get and renovate before popping for new homes in a run down park. 

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  • Jack Martin
    Specialist · Scottsdale, AZ · Member since 2014 · 626 posts · 700 votes
    7y

    @Jacob Brattain the advice from @John Jacobus is critical.  If the demand is not there to sell homes, you will not be able to fill up the park.  And if you cannot fill up the park, you will not be able to sell the POHs either, so therefore it will be tough to raise rents.  Demand is everything.  A town of 2500 people might prove to be too small.  

    Also, you will have a tough time getting any home manufacturers to set demo units in a park like that in this market.  There is so much demand on their plate right now, they are having a hard time keeping up with orders from repeat customers who own parks in major MSAs.  And, as @Mike G. noted, you would not want new homes in a park like that anyway.   

    Run the test ads.  If they prove adequate demand, your best bet will be to find used homes to bring in.  Consider this possible scenario:

    1. Test ads create a list of serious, qualified buyers who want to buy a home in the park, knowing your plan to make the park a great place to live.
    2. That means you can tell the tenants in the POHs that you are putting them for sale. They have a choice of buying the home, or moving out and letting the next guy in line buy it.
    3. You offer a program to buyers with a couple grand down and affordable payments for 3-5 years on the balance. You sell all 15 POHs this way over the next 6 months.  
    4. You take the 30k from the down payments and buy a used home, have it moved in, set up, and sell that one.  You take the monthly income from the payments and do it again every 3-4 months.  Repeat until the park is full.  

    That scenario takes 4-5 years to complete and is typical for a value add park like that. However, there is one critical component that must be present for that to work.  DEMAND.  Make sure it is there, or punt.

    All the best, 

    Jack

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  • Jeffery R Stensland
    Nampa, ID · Member since 2018 · 16 posts · 5 votes
    7y

    Are you making any progress on the park @Jacob Brattain? Any chance of finding a place that may have repo'd(?) or foreclosed homes and work something out with the agency holding them? I like your idea of leveraging your existing POH tenants by offering them the units that you wouldn't want to hassle with, maybe work an offer to give them the units contingent on a certain amount of extended lease time and at the same time bump the space rent up. I'm no MHP expert but I would imagine in a small town there would be a fine line in raising space rent high enough to push out the "problem" tenants but not the good ones, raising rates at the same time your'e offering them a home would seem to soften the hit though.

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  • Account Closed
    Rental Property Investor · Friendswood, TX · Member since 2010 · 663 posts · 508 votes
    7y

    @Jacob Brattain

    While the idea of giving the homes to the renters sounds logical turning them into owners at lot lease rates, the problem  is that you just took renters and calling them owners.  Owners are different in the MH space.  My guess is that you will get most of them or a good chunk of them back over time ( this is my pessimistic caution) and they will be in terrible shape.  Though i would also guess, there are a handful of people in there that may be great for owners and would probably fix up the home, make it theirs, etc.  What is the metro look like in terms of size?  What is average house price in the town along with the average 2 bedroom rent?  


    What are the conditions of the 2 homes? do they require fix up?  

    This has a lot of stuff going for it, i would definitely inquire more but the market is going to have to check out .  Also the 250-300 for a lot rent makes me believe the market might have some merit.  What do the other parks in town or close by look like in terms of occupancy. 


    Especially if you can lock up some attractive owner financing might be icing on the cake.  

    Also will be relevant any capX coming up or evaluating the deferred maintenance on the POH. 

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