Convince me NOT to invest in a MHP

28 Replies

Originally posted by @Nathan Barshinger :

@Jay Hinrichs

That's definately understandable. Better to have a low maintenance, smoothly run park with lower returns than a high maintenance park even though it has higher returns.

its not that it cost more to run.. its the risk of systems failures and having to upgrade to modern standards thats the risk

Don’t forget changing zoning/codes/laws. 

Last month I sold a seasonal lake cabin in MN I bought 25 years ago. To do that I had to have the septic system inspected. (It’s really 2 cabins on one system, but it’s a sink, a shower and 2 toilets.) to sell a property in Mn you have to have the septic system inspected  the inspection says tank is “like new” good news   But…

Guess what happened in the last 25 years? The health department decided your septic tank opening can’t be within 50 feet of your well. Kind of a problem when the parcel is only 75 feet deep and the well is in the middle of the house.  There’s a lake on one side and a road we don’t own on the other side. 

Luckily we were only about 10 feet in violation so we were able to dig it up and turn it diagonal for a few thousand. Otherwise we were told we could keep it in the family or remove the septic system.  Ps. It’s a couple miles to any sewer lines. 

This is likely something you wouldn’t know until you went to sell your private sewer park and you got the good news about all the upgrades you were going to do before you could sell. 

@Nathan Barshinger one thing I don’t think anyone has mentioned yet is don’t buy a park you don’t have the time to manage (and manage the manager). Turn around parks do take some time and effort and if you have a full time job you just need to assess your availability to see the plan through.

Mobile home parks can become fairly passive when they are stabilized but the repositioning of the property can be a bit intense depending on what is needed.

If you are buying a park that needs a lot of infill, capital improvements, a lot of vacant homes needing rehab and sale then consider partnering with someone who has the availability and complimentary skills to yours.

The catch with partnering is there is also risk in that so make sure you trust and vet the partner and make sure it is structured in a way that you are both adding value equal to your interests and are not both doing the same thing where you are stepping on each other’s toes.

I bring this up because we have bought parks from people who thought the turnaround was easy and didn’t understand the time commitment required in the beginning. They realized it after buying it and then had to sell.

Alternatives to partnering would be to invest as an LP in syndications or funds that are focused on this space. Same rules apply with vetting and trusting the sponsors.

If you have the availability then by all means go buy them and operate them subject to all the other great caveats that others have been commenting.

Hope this helps.