Mobile home park investing.

31 Replies

Hey guys, 

I was curious about investing in a mobile home park in NC/SC area. I am new to real-estate investing and I'm looking at MHP's to start investing in. I work full time so I'm looking for something that I can jump into with lower maintenance issues and not having to worry too much about toilet calls in the middle of the night, or leaking roofs. If I understand correctly, any park owned homes will by my responsibility to manage and maintenance. It seems that MHP are a good fit for my job and my personally available hours. I am also interested in where to find financing for mobile home parks. If you all have any suggestions or advice, I would be very grateful to hear them. Thank you for your time. 

@Dylan McClung Full disclaimer: I have never bought a MHP or even an individual mobile home. I'm passively looking for one, but nothing yet.

That being said, I think a MHP is an excellent investment to consider. Because you work full time you will want to focus on parks that are only renting the lots and do not own the homes themselves. That way your responsibilities shrink significantly.

@Paul Smythe Thanks for your reply. That's what I was thinking from the research that I've done so far. Obviously no property is ever void of responsibilities, but I believe MHP is a good choice so far.

Yes, you're correct. Any park owned homes will be your responsibility to maintain and manage. Those who own their own homes in the park should take care of them while you maintain the infrastructure and upkeep of the community. Hope that helps! 

Multiple MH Park owner here. Been in the business for 25+ years. 

Happy to answer any questions, but let me give you one piece of advice: Get rid of the park owned homes. 

Why?

The overriding reason to own and operate MH Parks is to just be renting out the dirt. That's why investors such as myself purchase them and not apartment complexes. You can't hurt dirt. 

When valuing MH Parks for purchase we will discount any and all park owned homes. They are a liability to our operating parameters. If we buy parks with park owned homes, we immediately move to get them sold off to the tenants. Further, lenders will not count the rent received from the home as it doesn't fit within their risk profile. 

MH Parks have some nuances to their operation and they can be "scary" to look at, but the upsides are tremendous. My seasoned properties enjoy a 19-20% cash on cash return. Further, they are stable thru various economic cycles. 


I have a quick question about buying my first mobile home park and saw a few things I had a question on. It's about how to evaluate the property value.

1.) There is the: NOI / CAP = $$$ park value
2.) Also can use: $$$ X CAP = NOI

I have a property that has an average NOI of 36K, which the property taxes and insurance have been pulled out from the value. However some of the homes are lease to purchase and are included in this NOI. I have heard this is a no no, and that lot rents should only buy in the NOI. Could someone please give me your advice on which is the industry standard on evaluating the property value.

I believe the industry standard is to only use the lot rents in the NOI. Including the rent for the home plus the lot rent can skew the value of the park because it places a higher value on the homes than is realistic. If lot rents are $250/month and the lease to purchase house rents for $550/month total, that means you're collecting $300/month in rent for the home. If you include that $300/month rent in the valuation, you're assigning a value of $36,000 to that trailer is you're purchasing at a 10 cap ($300*12*10=36,000), which is likely much more than the trailer is worth.

The NOI should only include lot rent in the calculations. You can assign some value to the lease to purchase homes, but that should be added in after you divide the NOI by the cap rate.

@Jonathan Halverson My problem is that this MHP has 10 lots which 9 of them have a lot rent of $150 a spot. The 10th spot is a shed collecting only $50 for rent/mo. NOI is on average 36K yet they are selling the Mobile home park for $336,000. there are only 8 MH owned by the property. Both methods I used above dont come close to this valuation.

@ Jason Pavloff

9 pads at $150 mo is $16,200 in annual revenue. 

The NOI the seller is stating is likely including the rent from the park owned homes.

As an owner of multiple parks and having been in the industry for years I can tell you park owned homes are a NEGATIVE. Investors such as myself and lenders heavily discount if not wholly IGNORE the revenue from the park owned homes. 

The "reason" for investing in a park is to rent out the dirt. Owners that rent out homes to tenants are turning the park into an unattractive apartment complex that carries all the expenses of the same. The anthesis of what owning a park is about. 

I would heavily discount the value of the home and the revenue they generate as not being legally attached to the spaces they are rapidly depreciating assets. 

Thanks Matt. 

Yea MHP's can be a great cashflow, and I know some folks who own a number of parks in the center of the country. However I'm not personally connected with any one who does it in NC / SC. It really gets a bad rap, but honestly I've seen some of these owners cash flow statements, and they are really great businesses when run properly. 

You'd definitely want to invest in great management & or bring on an experienced partner to fill out the team's skillsets. 

Working on financing myself. Any interest out there in doing crowd funding for mobile home parks?

Concur with the others in the group about park owned homes. Do not include them in the calculation for NOI or any other item.

Know lots about well and on site septic. Ask me how I became so smart? Not the problem it is cracked up to be, but it needs to be addressed in the buy.

I handle park homes by getting a 10% down payment and creating a note. Use third party to service the note to keep things legit. Sold as is where is and with a home warranty loan. I make sure no one calls for service.

Originally posted by @Paul Cmil :

Working on financing myself. Any interest out there in doing crowd funding for mobile home parks?

Concur with the others in the group about park owned homes. Do not include them in the calculation for NOI or any other item.

Know lots about well and on site septic. Ask me how I became so smart? Not the problem it is cracked up to be, but it needs to be addressed in the buy.

I handle park homes by getting a 10% down payment and creating a note. Use third party to service the note to keep things legit. Sold as is where is and with a home warranty loan. I make sure no one calls for service.

 What company do you have for the home warranty?

in my area I use Angie's List and get the one they recommend. They differ a lot by area. I don't think I'm allowed to endorse one over the other. There are some out there that are interested in collecting the first year fee. What you are looking for are the guys who are looking to do this long term. The ideal situation is that the relationship with the mobile home owner lasts for more than a year. 

@Matt Szura not so far from any conventional banks or lending due to my lack of experience and no previous deals. The only way I have found so far is to partner up.

@Dylan McClung - Nice. I own two communities in NC. One in Candler, NC, which is right outside of Asheville. 

While POHs (park-owned homes) aren't desirable, they are very common in parks in the Southeast. It's a nature of the beast. Everyone is looking for the same thing you are so pricing is high for lot rental only parks if you can find one. 

Financing depends on deal size. I cold called over 30 banks to find a lender to fund the Asheville deal. If the loan size is below $1M, you will most likely go with seller financing or local bank. If it is over $1M, you can probably use a loan broker. 

Ian what bank did U end up using ? What % down did they require ?

@Aaron Ryan - Entegra Bank. Talk to Josh Owens. Tell him I sent you. 25% down and 20 ammo; 3, 5, 7 year term

Asheville Savings Bank will do parks as long as the numbers work.  

We have one park all mobiles owned by the tenants, one where we own all the homes.  All the mobiles we own are pretty new so not a lot of issues and 7 year depreciation schedule is kind of cool.  As the homes age, we will sell them off and convert it to dirt only.  

Just about to buy another park with a few older homes.  Over the next 4 years we will sell off all the mobiles at the same time we are buying more old ones and fixing them up.  At the end of 4 or 5 years we will be 100% dirt.

Dirt is simple but when you can put an old mobile on a lot and fix it up for a total of 15k and get $395 over the $300 lot rent the numbers work pretty darn well.  

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Hello! I'm in search of a MHP for my first investment. How have you guys found your investments? Direct Mail Marketing, Loopnet, mobilhomeparkstore.com? What are your thoughts on these? Thank you in advance for your feedback.

Originally posted by @Matt P. :

Multiple MH Park owner here. Been in the business for 25+ years. 

Happy to answer any questions, but let me give you one piece of advice: Get rid of the park owned homes. 

Why?

The overriding reason to own and operate MH Parks is to just be renting out the dirt. That's why investors such as myself purchase them and not apartment complexes. You can't hurt dirt. 

When valuing MH Parks for purchase we will discount any and all park owned homes. They are a liability to our operating parameters. If we buy parks with park owned homes, we immediately move to get them sold off to the tenants. Further, lenders will not count the rent received from the home as it doesn't fit within their risk profile. 

MH Parks have some nuances to their operation and they can be "scary" to look at, but the upsides are tremendous. My seasoned properties enjoy a 19-20% cash on cash return. Further, they are stable thru various economic cycles. 

Matt, your post is almost too good to be true lol. Can you share some of the downsides to mobile home park investing so we can get the other side of the story too?

@Ray Lai  The downside is the stigma :) It is not sexy to own a mobile park.  

@Matt P. I am looking into MHP and am curious if you are investing out of state? Since you're from Orange County with the high costs, I'm curious to see what markets you are focusing on.

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