Can you get a loan to build an RV park?

Question

My investment group is looking at adding RV/Mobile Parks to our portfolio. We are considering purchasing an existing park but we are also considering building our own. Has anyone ever built their own utilizing a loan? if so, what kind of loan did you get (construction?), how long was the term, and what was the rate?

Frank Rolfe · Answer

It's infinitely easier and more profitable to buy an existing park than to build a new one.  Not only is it nearly impossible to find a lender but cities have not allowed new mobile home parks to be built since the 1970s. As a result, you'll have to find some land that is so far out of the city that they can't stop you, which means you'll also have no access to city water and sewer and will have to build all private utilities. Worst off, when you go to find customers, nobody is going to want to drive that far out. Then, to make it even worse, you have no customers on day one and you will start piling up debt payments until you hit breakeven -- which can take a really long time. Also, don't forget that you'll have to buy all the homes to fill those lots and then sell them, which can take as much capital as building the park, unless you can get into 21st Mortgage's CASH program (which you probably won't be able to because you'll be too rural).

RV parks are a different -- yet similar-- story.  RV parks are mostly built outside of city limits, but they still will start off with zero customers and it will be a slow build.

Buying existing properties means they already have net income to cover debt, and you have upside in pushing rents & occupancy and cutting costs. It's safer and more profitable.

The only exceptions are those rare cases where you find already zoned MH land in hot markets that was somehow missed by everyone. But I've only seen three of those deals in 25 years.

If you want to do park expansions, that's a different story, but even then your odds of getting the necessary permits are maybe 10% given the hostility of city government to affordable housing in general, and mobile home parks in particular.

Jack Martin · Answer

@Christopher Fordinal pay close attention to what @Frank Rolfe shared above.  Not only is he more qualified to share that perspective than anyone else on BP, what he is describing is true.  It is extremely difficult to build a park today.  Unless you find the "needle in a haystack" in a major market with the proper zoning in place, it is just not worth the risk and the brain damage.  That doesn't mean it cannot be done, but it is simply a better idea to buy an existing park and improve it.