Finding Mobile Home Parks for Investment

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All Cash talked about mobile home parks being cash cows. I was wondering how exactly to invest in a park. Where do I locate parks for sale?

Is it better to invest in the homes themself or in a park??

*You'll need 25% down..
*make sure you can obtain the owners operating expense reports for the past 2-3 yrs..
*if the park is split mobile home park / RV facility.. you need to make sure that your lender will accept this...
* you'll need to obtain the rent roll
* the bigger the loan size the better your chances of approval are...
*some lenders will allow seller seconds in order to make the deal work

currently in the midst of a transaction at 1.5 million... buyer is coming in stated with 25% down...735 credit score...

But,
Wanted to point out that one does not necessarily need 25% down as there are some very good lending programs that will go to 80% LTV for MHP's.

Good info Ben and Jason. Where exactly would one go to find these parks for sale? Are there good online resources? Do you just contact a commercial real estate company? Any other way to find the leads?

I work with some folks that have parks for sale all over the US. Tell me what you are looking for as for an area and I can help you out.

Patrick
[PHONE NUMBER REMOVED]

Hey Patrick, thanks for your offer. Before I look at your leads, I would like to just browse around at what is available around. Are there any websites out there that carry mobile home listings?

Hey all - I found a few sites that carry mobile home listings:

http://www.mhplanet.com/ OR http://www.wowmh.com/ (seem like the same company)
http://mfdhousing.com/portal/fsbo/listing_browse.php (Great directory of mobile homes)

Looks like a decent start

Prepare yourself; I have a lot to say on this subject :D

To begin……Come on Loan guys, your current profession is blinding you from the fact that many mobile home parks are purchased with much less than 20% down through owner carried notes. Small to medium sized park owners are typically older gentleman that have been running or overseeing the managers of their respective parks for a long time. Many of them are tired of this responsibility and would love to have someone like them come and take the park off their hands. Furthermore, some of these same owners prefer doing business the old fashioned way (without bankers / real estate brokers breathing down their neck and inundating them with paperwork). In other words, a large percentage of mobile home park owners would rather take some initial financial consideration, make a nice profit each month off the interest on their note and not worry about the day to day issues of running a park. Additionally, many of these owners do not want to deal with a several hundred thousand to million dollar tax problem if they sell the park outright. Sure they could 1031 it into something bigger; but then they’re in the same boat as before.

Sorry loan officers but investors should ALWAYS, ALWAYS shoot for owner financing in your mobile home park purchases.

Marks, In response to your initial post, as to whether it is better to invest in mobile homes on in mobile home parks, I would say the latter.

Investing in mobile home parks is an absolutely beautiful thing. Not only is it a long term land play, but you have NUMEROUS ways to make money through your park. As opposed to investing in single family homes it is actually very difficult to NOT achieve positive cash flow each month. This is due to the following reasons:

1. The parks are usually in a less than favorable part of town. Therefore the land is cheap and you will be spreading that cost over numerous mobile homes.

2. Provided you purchased the right mobile home park, there will be vacancies and their will be a few spaces for you to bring in extra mobile homes. (Yes, that’s right….you want at least half the park to be vacant when you purchase the property as that fact will kill the sellers price and ensure that you end up buying a screaming deal.) You’re healthy, sharp and full of energy so you’ll improve the quality of the park, raise rents and maximize your rent roll. By the way this will immediately increase the value of your mobile home park through cap rate valuation. Net Operating Income (not including cost of financing) / cap rate.

Example

30 Space Park, $300 a month Rent Roll (50% Vacant) = $54,000 yearly rent

$54,000 – 16,200 (30% of rent goes towards Operating Expenses) = $38,000

$38,000 (N.O.I.) / 9.0 % (cap rate) = $422,222 (Your Purchase Price)

Your up side:

30 Space Park, 100% Occupancy, $320 a month rent roll = $115,200 yearly rent

$115,200 - $34,560 (30% park operating expenses) = $80,640

$80,640 (N.O.I.) / 9.0% (cap rate) = $896,000 ...I would sell at this point :)

3. If cash flow is low you can add additional revenue by putting in a coin operated laundry mats, adding vending machines, arcade games, day care services, etc.
4. Lastly, you should have purchased a park that came with owner rights on the mobile homes themselves. This will enable you to be extremely creative with how you fill your park with people. Far and away the best tactic is to Lease option your mobile homes instead of renting them. Home ownership is the American dream so when you advertise “Own your own home, $3000 down, bad low monthly payments – Bad credit OK, call Boca Vista Mobile Home Park” Your phone will ring off the hook, trust me. From there you take their down payment and have them sign your lease option paperwork that details the term of their loan with you. So why sell them one of your mobile homes….isn’t that an asset to the park you ask? Yes, but:

A. Now you have someone in your park that has pride of ownership and will most likely take better care of the mobile home than most people would.
B. Because they technically own the rights to the mobile home, you are not responsible for costly maintenance.
C. Due to the interest on his loan, this person will pay you more each month than anyone renting a mobile home in the area.
D. If he/she gets promoted or saves up enough cash to pay the remaining balance (this almost NEVER happens by the way) then you make a substantial amount of money because due to serious demand issues, you can sell these homes for much more than they are worth.
E. Most of the time, the person will be late on a payment or two and will flee during the middle of the night. In that case, the property is 100% yours again, you’ve pocketed the $2000 option payment and you start the process over again.

Anyways, I think I might have gone overboard with this post. Its just that I sometimes can’t believe why more people don’t purchase these cash havens. Anyways if you’ve read this far, here are some very useful links. The first is a mobile home park investing website that has some insightful articles and offers the investment course that got me started in this complicated but lucrative business. The second website is a directory and marketplace for all things related to the mobile home industry. You can find mobile home parks for sale on this website. The final website is the largest commercial property listing service.

http://www.mobilehomeparkprofits.com

http://www.mobilehomeparkstore.com

http://www.loopnet.com

Good luck with your investments !

Wow, thanks for the explanation. That should help out quite a few of us.

First off BJmason32, went above and beyond and really detailed some of intimacies of the business.

I do have to say that there are average OER (operating expense ratios) that are used for the business, but if there's one thing I have seen after reviewing many communities book's (P&L statements), 30% expenses for a community with all "park owned" homes is very low, so please don't assume that is a safe number.

The class he suggested is probably a great idea, before you plunge head first into a 500k+ investment.

Because I broker in Florida and you pay a fair amount for the land value (even in a slower housing market), the cap rates are a little lower then other area's where the land isn't worth as much. Every investor knows that it is Florida and the land in any decent area is still valuable.

Florida and California are somewhat similar markets. California just has a little higher property values so inversely the cap rates are even lower. Basically the better the collateral (if a Tornado wiped the whole site clean, what would the raw land be worth?) the lower the cap rate.

There are two general types of MHP's, land lease, and park owned.

Land lease communities are for the passive investor, they are extremely stable and if you buy at a rate that covers the mortgage with a 20% down, within a couple years of annual rent increases you will be profiting, all the time you are getting the land free. These communities trade anywhere from a 5.5% cap for large communities (250+ units), to 8%+ for older communities with single-wides and small lots, that would be hard to refill if you lost a resident. The cost of moving and setting up a MH in FL is 3-5k, without the impact fee's of 5-7k, so most residents sell their homes, instead of moving them, also if they are delinquent on the lot lease, you have a free home. The national average operating expense ratio for land lease has been in the 40% range for a while now.

Park owned communities, are a lot more like owning an apartment complex because you are responsible for the repairs and maintenance (R&M), and they require 24-hour access to someone if a pipe or AC unit breaks. Because you have to rehab homes when someone moves out, plus the extra demands of 24-hour emergency repairs, and the higher vacancies (10-15% for some when operating at best vs 5% tops for land lease), I would say that these communities will have a much higher gross rental income and a little higher expense ratio's.

The tenants are paying you for the home, and lot rent, but with all the before mentioned expenses, you need to look at the books (P&L statements) to deterermine the actual OER (and make sure you go through each item with the owner because they a lot of times will have personal items mixed in, that wouldn't apply to you, and then go through the park, and look for things that probably cost more then the listed amount, and ask the owner about those). Anyway these communities probably run closer to a 50% OER.

BJmasons idea of selling them the homes with a large down payment (2-3K), is great, but some area's and homes may make that difficult to accomplish, and you want to buy based on the current circumstances, incase you can't do any better then the current operator. Pay a little for potential, but don't pay 100% today on future income, maybe somewhere between 25-50% depending on the likelihood and cost of it's fruition.

mobilehomeparkstore dot com
and loopnet dot com

are by far the two best nationwide sources to just browse communities, Find someone that specializes in Parks for the exact state you are looking in. because it is a relatively small niche most specialist handle at least an entire state. BTW a fair amount of sales in this business are pocket/confidential listings that never make it to the internet, so that’s another reason to build a relationship with a broker.

For Florida, give me a call and I will do my best to help.

James Cook
FL MHC/MHP/RVP Specialist

There is some really great info on MHP and MH investing on other sites. People who are active investors, tips for what materials to use, how to finance the deals and other things.

It is a niche that many RE investors know nothing about. Hence the typical RE investment group will many times know nothing about the topic.

Either use Google or send me a message as I can point you to some specific info that will help. I have meet a number of MH investors and few cross over to RE investing. It is like the two groups do not mix.

John Corey

I have meet a number of MH investors and few cross over to RE investing. It is like the two groups do not mix.

Aren't many of the MHP investors former REI that don't look back?

Wow this is probably the best information I've seen on this subject.

On a side note is mobile home park investing, i.e. purchasing one, for the experienced investor or can someone with less experience be able to invest as well? Thanks

Great thread here!! I think MHP are great for cash flow investors, but what about appreciation? Other than buying the park at a discount (empty spaces for extra mobile homes, what are some other ways the park could appreciate?)(because they don't tend to go up in value.) Improve operations, land appreciation....idk. Just curious. Thanks in advace, Jonathan

I'm no expert as you can tell, but I think the land is the most important especially if you live in an area where developments are popping up.

Hi, a lot of you have good questions, but there are almost too many to respond to individually. If you are interested in the asset class of MHP/MHC's then call me. I have some good contacts in different parts of the country, so if you aren't looking in Florida, then I can point you to some of the best in other areas. And, as long as I don't get swamped with calls I should be able to give you my 2-cents.

James Cook
MHC/RVP Specialist

Originally posted by "theallnewjc":
Hi, a lot of you have good questions, but there are almost too many to respond to individually. If you are interested in the asset class of MHP/MHC's then call me. I have some good contacts in different parts of the country, so if you aren't looking in Florida, then I can point you to some of the best in other areas. And, as long as I don't get swamped with calls I should be able to give you my 2-cents.

James Cook
MHC/RVP Specialist

James

I am in the Tampa area and would love to find out about some park investment opportunities from you.

Ray

Hello James, do you have any contacts in PA? If so PM. Thanks

Sorry the forum won't let me PM anyone or post my phone number, so I recommend if you would like to talk just go to [LINK REMOVED] and my contact info will be there. Thanks and sorry again about the communication issues.

Hey James I noticed that your website is down now, when do you think it will be back up?

I could not resist in chiming in for my two cents!

Investing in mobile home parks is a fantastic investment! Not only is it a long term land play, but you have NUMEROUS ways to make money through multiple "profit centers" in a park. Single family homes and apartments are a "one trick pony" with only one source of revenue… the rent payment. It is much easier to achieve your financial goals with mobile home parks due to the following reasons:

1. Provided you purchased the right mobile home park, there will be vacancies for you to bring in extra mobile homes. (Yes, that's right….you want at least 20% of the park vacant so that you have a huge upside!) You're healthy, sharp and full of energy so you'll improve the quality of the park, raise rents and maximize your rent roll. By the way, this will immediately increase the value of your mobile home park through the cap rate valuation.

Example

30 Space Park, $300 a month Rent Roll (50% Vacant) = $45,000 yearly rent
$45,000 - 15,000 (33% of rent goes towards Operating Expenses) = $30,000
$30,000 (N.O.I.) / 9.0 % (cap rate) = $333,333 (Your Purchase Price)

The Upside:
30 Space Park, 100% Occupancy, $320 a month rent roll = $115,200 yearly rent
$115,200 - $34,560 (30% park operating expenses) = $80,640
$80,640 (N.O.I.) / 9.0% (cap rate) = $896,000 (at 100% occupancy)
Over $500,000 profit!

2. If cash flow is low you can add additional revenue by putting in a coin operated laundry mats, vending machines, lawn service, day care service, self storage, etc.

3. You can purchase mobile homes at a 40%-50% discount and resell them on terms (either with a lease option or note). Home ownership is the American dream so when you advertise "Own your own home, $2000 down, low monthly payments - Bad credit OK, call Boca Vista Mobile Home Park" your phone will ring off the hook, trust me. From there you take their down payment and have them sign your lease option paperwork that details the term of their loan with you. So why sell them one of your mobile homes….isn't that an asset to the park you ask? Yes, but:

A. You now collect the lot rent. Pure profit with no additional expense.

B. Now you have someone in your park that has pride of ownership and will most likely take better care of the mobile home than a renter.

C. No costly maintenance. The buyer is responsible for all maintenance.

D. You can purchase the mobile home at wholesale cost and sell to your customer for retail. In many cases, you can double your money on each home. In addition, you charge an interest rate of 10-15%.

E. Some of your buyers will not finish out the loan term and will give you back the home in good condition. At that point, the property is 100% yours again, you've pocketed the $2000 option payment and you start the process all over.

Mobile home parks can be great sources of big monthly cash flow and equity. Ultimately most will become a land play.

Over time I have found several great resources:
http://www.loopnet.com
http://www.ebay.com (believe it or not there are some diamonds in the rough on here)

Kim

This is a great thread as it cuts right to what makes investing in a MHP such a good investment. I will take some issue with the post on vacancy, as filling spaces can be tricky. I tend to look for primary upside in under market rents and in utilities that can be sub metered. These can be huge bumps to your NOI. You need to check in your due diligence with the state so you understand what sub metering consists of, as every state is different. In some state you have to register as a public utility! So watch out for that... As for filling pads. I have found that to do this you need to purchase the homes, set them up and then sell them on payments. In most markets you will need to budget about $10,000 per home, and find a way of managing that process from another state (unless you buy a park very close to where you live). I will not argue there is money to be made by filling a park, but if the home costs $10,000 to move in, and it increases the value of your park by $20,000 you might spend an whole lot of money putting 15 or 20 homes into your park. You also need a lot of disposable income to do so.

A word of caution: If your looking at this strategy you must have a park with enough pad rent to support a increased CAP rate. If your pad rent is $125 per month, your CAP increase might be $10,000 to the entire value of the park, or less depending on your expenses per pad. You really need to understand the relationship between a pad rented, the expenses and the total cost of buying, setting up and selling the home. In many parks pulling in homes is a wash at best. You might make your money back on the home, but is that your best investment dollar? This is a advanced technique for investors with skill sets in park management and in set up and sales of mobile homes.

One VERY important point on mobile home park investing,,,Make double darn sure the park is on city or similar water and sewer and NOT on private wells and septic s. Those regulations on public water and sewer systems will kill you,,,and result in a closed down park. Dont ask me how I know.

For bank loans with the "bankers" in control plan on all of the following:

1. Plan on 35-50% down in this unhealthy envirnment.
2. Plan on doing triple financial highly invasive strip search for applying for a loan.
3. There are no honest appraisers out there - it totally amazes me that as a Realtor for 10 years the appraisal ALWAYS came in at the asking price!
4. Loan brokers ask for 1.5% and steer you only to banks that ask for another 1% so you lose 2.5% of your buying power with these hands in your pocket. Then should they not feel like coming to closing to pick up their check or having it mailed to them, they will reach into your pocket again and charge you a "wire-transfer fee" to have their check deposited into their account.
5. Don't forget the Realtor if selling - they want to reach into the seller's pocket for an undeserved share of the sale proceeds 5-10% of profit goes away. It is really disgusting!

Every investor I have ever talked with seems to be doing rather well. Yet banks who control the loans and are usually getting 200-300% returns on their loans are losing money?? They stick their hands out for a handout from the minimum wage earners taxes to give themselves a bonus for bankrupting their bank?? The government takes the money out of the poor tax payers pockets (reverse Robin Hood Syndrome?) and then give it to the banks. Instead of using this money for the purpose it was given to them for - the banks use it to buy bonds and now the government is using the tax money to pay the banks 5% interest on money that they received for FREE??

When will it end and we stop the banks from this highway robbery of their own country??

Realtyman

Jonathon:

There are several ways to make improvements in cash flow. Increase income or decrease the expenses is the first area to look at. Are rents low can they be increased? Can I offer additional services? Build sheds and carry paper back for those getting new sheds? Add storage lot - charge for storage? Add vending machines, soda, candy, laundry facilities, etc. Expenses need to be looked at carefully, to see what can be reduced. Another sore spot in some MHPs are bad managers that are driving away good people and keeping only the bad ones. A change in management upon take over can do wonders to how well the MHP performs over time!

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