Mobile Home Park

[Alonzo Avents]

Hello all and great day! I'm considering buying a mobile home park on a seller finance. What are some things i should be aware of? I have multi-family property, but have no knowledge about mobile home parks. Any input is appreciated!

[Account Closed]

I guess the first step would be to tackle the valuation of the park.  Parks are evaluated by three separate methods for each operation:

1. The land lease component is valued on an income approach. Your CAP rate will vary based on risk.

2.  The homes are valued at their physical value - do not take an income approach with these.

3.  Notes are given a discount rate.  This will vary based on time left to mature and the underwriting that went into them.

Next, you need to take an inventory of the infrastructure.  This includes the water, sewer, roads, electricity, gas, etc.

Then, you will need to take a look at the area.  City-Data is a very good resource for this.  You will want to look at unemployment rate, crime rate, vacant housing rate, apartment rents, median income, median home prices, etc.  On this part of it you want to statistically prove that the area is economically sound and that the homes in your park are not in competition with other forms of housing.

After that, I would take a look at your tenant base and market.  You will want to get a handle on the process the previous owner used to vet tenants.  This is especially important on your park owned homes and notes.  You will also want to do some test marketing throughout your diligence to gauge the demand.

Just to keep this from getting too drawn out, I could probably help you more if I knew a little bit about the statistics of that area, the resident break down (#lots, #occupied, #of POHs, #of notes, Lot rent amount, etc.), and breakdown of the utilities and who pays.