Updated about 4 years ago on . Most recent reply
Mobile Home Park 1st purchase, need advice
Hi there BP! I've stumbled across a package deal to acquire 3 Mobile Home Parks. The seller will carry 50% if I purchase all three parks. The prices are right, and they all cash flow with tenants owning all but 2 of the homes. These are smaller parks, but they cash flow nicely.
What are some pitfalls with mobile home parks?
What are some things that I should be mindful of before making this deal?
Are there specific questions that I should ask?
I've asked for the financial statements, and they look solid. This would be my first deal of this magnitude. I don't want my excitement to cloud my judgement, so any advice would be helpful.
Thanks!
Most Popular Reply
The big one to check first is county/city ordinances. Some counties and cities are very hostile toward MHP owners (for example, I have seen multiple municipalities with regulations in place that will not allow any additional homes to be brought into an MHP even if it is appropriately zoned. For example, if a home burned down then you or a tenant could not bring in a new one). Also, if it has private utilities check these closely. Ordinances and utilities can be major show stoppers.
Here is a list of due diligence item I use on my MHP investments:
| Check zoning and permitting compliance (city zoning) |
| Check local law compliance (with Sherriff and/or Police) |
| Search City Council minutes for any adverse mentions |
| Check with State Department of Public Health's Division of Community Environmental Protection (CEP) for compliance violations |
| Check with property neighbors for any disputes or pending legal actions |
| Water - Check with water provider for any open or recent issues |
| Sewer - Check with Sewer provider for any open or recent issues or complaints |
| Electricity - Check with electricity provider for any open or recent issues |
| Rent roll with space number, name of resident, move-in date, renter or owner occupied, number of occupants, monthly rent, additional charges, current balance due and any relevant notes about the resident |
| List of capital expenditures for the last 3 years |
| Get last 2 years of Profit and Loss statements |
| Get last 2 years of Tax Returns for the LLC/Park |
| 12 months of Bank Statements for the LLC/Park |
| Current Accounts receivable statements |
| Build proforma for next 5 years using rent roll and expenses |
| Get owed taxes to City/County/Local gov |
| Get Insurance Quote of commercial liability insurance |
| 2 years of utility bills |
| Property Tax bills for last 2 years |
| List of park owned home including copies of “rent to own” or sales contracts |
| Get list of vendors and contract status for each vendor |
| Talk with on-site property manager regarding issues |
| Conduct Onsite Property Visit with property manager |
| Spreadsheet detailing who pays all utilities including water, sewer, gas, electric, trash, cable, etc.… |
| Copies of any contracts that will transfer to buyer including laundry, trash, phone, equipment, etc.… |
| Dates and amounts of the last 3 rent increases |
| Signed rules and leases for each resident |
| Names and contact information of professional service providers including lawyers, accountants, engineers, insurance brokers, inspectors, appraisers, realtors/brokers, etc.… |
| Spreadsheet for utilities that details age, composition, capacity, physical locations, etc.… |
| Any drawings or maps of the park and infrastructure including lot sizes |
| Sewer plant or septic system repair and maintenance records |
| Disclosure from seller of current or recent problems with infrastructure including buildings, water, sewer/septic, gas, electric, etc.… |
| Names and contact information of contractors including plumbers, tree surgeons, electricians, gas inspectors, septic companies, roto-rooter services, etc.… |
| Hands On inspection of each POH (Be sure to identify SCRAP homes and assign a negative value) |
| Professional inspection of on-site electrical systems (document any deficiencies); Are box amperages up to code? Map of all boxes. |
| Professional inspection of on-site Septic systems (document any deficiencies) |
| Get current pad plat map (including lot numbering, occupied lots, and open lots) |
| Current map of infrastructure locations (e.g. sew lines, water lines, electrical junctions boxes, culverts, etc.…) |
| Review Survey and Survey Exceptions in Detail |
| Police Incident Reports for MHP |