Mobile Home Development

[Nate Raynor]

Hi All, 

I have an opportunity to purchase a piece of land that I think will be great for a mobile home park given a number of location constraints and opportunities. I have a strong background in multifamily and retail development but I have never done a MHP before. Does anyone have a good proforma for evaluating an MHP?

On the surface it seems straight forward, however, in my experience anything straightforward is almost always not straight forward. 

Thank you!

[Rachel H.]

@Nate Raynor You may want to check the zoning on that piece of land before doing further research. There may or may not be restrictions on the land when it comes to placing mobile homes (either new or used) on top of the land. Hope that helps! 

[Jay Hinrichs]

other than the obvious land use rules. ( is this Oregon ).

the main thing we found when looking at land to do a park on in Oregon was Absorption.

A lot of money out to buy the dirt then the cost to set up the park which can run 20k plus per pad. then the time it takes to fill the park.

those are the calcs you have to run to see if its going to work.. Of course if your all cash drag and holding costs wont matter in the long run.

So for us they simply never pencil from ground up because of the cost and absorption time.

[Nate Raynor]

Thanks for the comment John. 

What were you seeing for absorption? The site I am looking at is in North Vancouver market - just north of PDX. Were you looking in the greater pdx MSA?

Most of the conversations around absorption have been surrounding the eviction and pad turn risks. Discussion has been around 4 month during initial lease up.

I am not planning on going in all cash, but likely a 50/50 debt to equity.

[Nate Raynor]

Quote from @Rachel H.:

@Nate Raynor You may want to check the zoning on that piece of land before doing further research. There may or may not be restrictions on the land when it comes to placing mobile homes (either new or used) on top of the land. Hope that helps! 

 Thanks for the comment Rachel. For this particular property, the zoning does have mobile homes as an Permitted Allowable Use. But yes, checking the zoning is always a must ahead of time. 

[Jay Hinrichs]

Quote from @Nate Raynor:

Thanks for the comment John. 

What were you seeing for absorption? The site I am looking at is in North Vancouver market - just north of PDX. Were you looking in the greater pdx MSA?

Most of the conversations around absorption have been surrounding the eviction and pad turn risks. Discussion has been around 4 month during initial lease up.

I am not planning on going in all cash, but likely a 50/50 debt to equity.

I am assuming you mean me  Jay :)  I owend a park in Vancouver and it was a success.  Do you mean you can fill the park in 4 months. ?  projects we looked at were in Oregon and if your doing actual MH and your doing a larger project like 100 to 200 units it can take a few years to many years to fill them  and you usually need a mH dealer on site to sell them  etc etc.

[Nate Raynor]

Welp, that's embarrassing, so sorry Jay! 

This is a smaller site with an estimated 45 units. We are are currently modelling 4 per month, so we would fill it in a year or so. I had one person say that was overly conservative, but others think that's about right for being in the north Battle Ground area.   

How important were/are site amenities for your MH site? Laundry, park, playground, etc. I am seeing some amenities in our comps, but many don't. My team is split 50/50 on this topic.

[Jay Hinrichs]

Quote from @Nate Raynor:

Welp, that's embarrassing, so sorry Jay! 

This is a smaller site with an estimated 45 units. We are are currently modelling 4 per month, so we would fill it in a year or so. I had one person say that was overly conservative, but others think that's about right for being in the north Battle Ground area.   

How important were/are site amenities for your MH site? Laundry, park, playground, etc. I am seeing some amenities in our comps, but many don't. My team is split 50/50 on this topic.

ya the park I was looking to develop was in Silverton the big pond West of town its now a subdivision it would have been north of 200 spaces and we figured 5 years to fill it but that was then and now is now:)  if you think your going to get a 12 month absorption then that will work I am sure.  

should be able to build the spaces in 6 months or so depending on weather and how good your underground guys are.

My park in Vancouver was 50 spaces and no amenities. but it was close in and of course i did not build it  it was full day one I bought it. 

AS for amenities you may need some to get folks to go that far north. If your going after families maybe a playground.. But no laundry your doing brand new homes they will all have laundry right ?  unless your doing an RV park then of course you would want those.

I would think your conditions of approval will dictate open space etc.

Good luck with it sound like a nice project !!!!

[Robert Ellis]

Quote from @Jay Hinrichs:

other than the obvious land use rules. ( is this Oregon ).

the main thing we found when looking at land to do a park on in Oregon was Absorption.

A lot of money out to buy the dirt then the cost to set up the park which can run 20k plus per pad. then the time it takes to fill the park.

those are the calcs you have to run to see if its going to work.. Of course if your all cash drag and holding costs wont matter in the long run.

So for us they simply never pencil from ground up because of the cost and absorption time.

 All these mobile home park investors imagine if they opened up their minds to truck parking facilities and did all the same utility improvement, higher density for parking than mobile home, didn't have tenants, same on site manager. Much higher returns. 

[Logan M.]

Quote from @Robert Ellis:

Quote from @Jay Hinrichs:

other than the obvious land use rules. ( is this Oregon ).

the main thing we found when looking at land to do a park on in Oregon was Absorption.

A lot of money out to buy the dirt then the cost to set up the park which can run 20k plus per pad. then the time it takes to fill the park.

those are the calcs you have to run to see if its going to work.. Of course if your all cash drag and holding costs wont matter in the long run.

So for us they simply never pencil from ground up because of the cost and absorption time.

 All these mobile home park investors imagine if they opened up their minds to truck parking facilities and did all the same utility improvement, higher density for parking than mobile home, didn't have tenants, same on site manager. Much higher returns. 

 Trucking is going through a major contraction right now and if self-driving trucks ever become a thing you are out of business.

[Logan M.]

I would highly suggest buying an existing community, it is almost always easier and more profitable unless you know what you're doing.

[Jay Hinrichs]

Quote from @Logan M.:

I would highly suggest buying an existing community, it is almost always easier and more profitable unless you know what you're doing.

logan the issue on the West coast is parks are treated like investment grade props and sell at a very low cap rate even in this interest rate environment.  So if one can buy dirt at a reasonable price get it approved and built and filled up as stated above they will force equity and have a very good investment that is worth a ton more when completed etc.

the issue out this way is finding any dirt you can actually build a park on  most cities wont allow them then you have the other barriers to developement and absorption like I mentioned above these all factor into it..

out in the mid west and deep south one can buy a park for 7 to 10 cap all day long.. in OR WA CA your going to find it difficult to find a park above a 4 to 5 cap.

[Robert Ellis]

Quote from @Logan M.:

Quote from @Robert Ellis:

Quote from @Jay Hinrichs:

other than the obvious land use rules. ( is this Oregon ).

the main thing we found when looking at land to do a park on in Oregon was Absorption.

A lot of money out to buy the dirt then the cost to set up the park which can run 20k plus per pad. then the time it takes to fill the park.

those are the calcs you have to run to see if its going to work.. Of course if your all cash drag and holding costs wont matter in the long run.

So for us they simply never pencil from ground up because of the cost and absorption time.

 All these mobile home park investors imagine if they opened up their minds to truck parking facilities and did all the same utility improvement, higher density for parking than mobile home, didn't have tenants, same on site manager. Much higher returns. 

 Trucking is going through a major contraction right now and if self-driving trucks ever become a thing you are out of business.

 you still have to park self driving trucks my friend ... and only some portions of trucking are going through a "contraction". Flat Bed is super strong, aggregates and trucking that supports new construction is extremely strong right now and is booming. I'm not sure if you know much about these industries than what you listen to on the news. Every truck parking facility that is built in our market is fully leased up quickly. And here's a really good kicker, if trucking is in the tanks, all the trucks have to be parked right? There you go! 

[Logan M.]

Quote from @Robert Ellis:

Quote from @Logan M.:

Quote from @Robert Ellis:

Quote from @Jay Hinrichs:

other than the obvious land use rules. ( is this Oregon ).

the main thing we found when looking at land to do a park on in Oregon was Absorption.

A lot of money out to buy the dirt then the cost to set up the park which can run 20k plus per pad. then the time it takes to fill the park.

those are the calcs you have to run to see if its going to work.. Of course if your all cash drag and holding costs wont matter in the long run.

So for us they simply never pencil from ground up because of the cost and absorption time.

 All these mobile home park investors imagine if they opened up their minds to truck parking facilities and did all the same utility improvement, higher density for parking than mobile home, didn't have tenants, same on site manager. Much higher returns. 

 Trucking is going through a major contraction right now and if self-driving trucks ever become a thing you are out of business.

 you still have to park self driving trucks my friend ... and only some portions of trucking are going through a "contraction". Flat Bed is super strong, aggregates and trucking that supports new construction is extremely strong right now and is booming. I'm not sure if you know much about these industries than what you listen to on the news. Every truck parking facility that is built in our market is fully leased up quickly. And here's a really good kicker, if trucking is in the tanks, all the trucks have to be parked right? There you go! 

 Your last line is a great point. I am not saying that it doesn't have a use and won't have a future use but it is a lot easier to create a parking area than something with a higher barrier to enter. How long before it is overbuilt? I don't know the answer and maybe it will never get there. 

[Logan M.]

Quote from @Jay Hinrichs:

Quote from @Logan M.:

I would highly suggest buying an existing community, it is almost always easier and more profitable unless you know what you're doing.

logan the issue on the West coast is parks are treated like investment grade props and sell at a very low cap rate even in this interest rate environment.  So if one can buy dirt at a reasonable price get it approved and built and filled up as stated above they will force equity and have a very good investment that is worth a ton more when completed etc.

the issue out this way is finding any dirt you can actually build a park on  most cities wont allow them then you have the other barriers to developement and absorption like I mentioned above these all factor into it..

out in the mid west and deep south one can buy a park for 7 to 10 cap all day long.. in OR WA CA your going to find it difficult to find a park above a 4 to 5 cap.

 That is a great point, the barriers will create a tremendous amount of scarcity.

[Nate Raynor]

Quote from @Robert Ellis:

Quote from @Logan M.:

Quote from @Robert Ellis:

Quote from @Jay Hinrichs:

other than the obvious land use rules. ( is this Oregon ).

the main thing we found when looking at land to do a park on in Oregon was Absorption.

A lot of money out to buy the dirt then the cost to set up the park which can run 20k plus per pad. then the time it takes to fill the park.

those are the calcs you have to run to see if its going to work.. Of course if your all cash drag and holding costs wont matter in the long run.

So for us they simply never pencil from ground up because of the cost and absorption time.

 All these mobile home park investors imagine if they opened up their minds to truck parking facilities and did all the same utility improvement, higher density for parking than mobile home, didn't have tenants, same on site manager. Much higher returns. 

 Trucking is going through a major contraction right now and if self-driving trucks ever become a thing you are out of business.

 you still have to park self driving trucks my friend ... and only some portions of trucking are going through a "contraction". Flat Bed is super strong, aggregates and trucking that supports new construction is extremely strong right now and is booming. I'm not sure if you know much about these industries than what you listen to on the news. Every truck parking facility that is built in our market is fully leased up quickly. And here's a really good kicker, if trucking is in the tanks, all the trucks have to be parked right? There you go! 

Hi Robert. This is actually an interesting view, and admittedly I know nothing about this specific industry. I think the MHP I'm looking at wouldn't be a great fit given how far away it is from a major highway, but I like this idea. Do you have any recommendations or resources that I could look to in order to learn more?

Thanks for chiming in. 

[Robert Ellis]

Quote from @Nate Raynor:

Quote from @Robert Ellis:

Quote from @Logan M.:

Quote from @Robert Ellis:

Quote from @Jay Hinrichs:

other than the obvious land use rules. ( is this Oregon ).

the main thing we found when looking at land to do a park on in Oregon was Absorption.

A lot of money out to buy the dirt then the cost to set up the park which can run 20k plus per pad. then the time it takes to fill the park.

those are the calcs you have to run to see if its going to work.. Of course if your all cash drag and holding costs wont matter in the long run.

So for us they simply never pencil from ground up because of the cost and absorption time.

 All these mobile home park investors imagine if they opened up their minds to truck parking facilities and did all the same utility improvement, higher density for parking than mobile home, didn't have tenants, same on site manager. Much higher returns. 

 Trucking is going through a major contraction right now and if self-driving trucks ever become a thing you are out of business.

 you still have to park self driving trucks my friend ... and only some portions of trucking are going through a "contraction". Flat Bed is super strong, aggregates and trucking that supports new construction is extremely strong right now and is booming. I'm not sure if you know much about these industries than what you listen to on the news. Every truck parking facility that is built in our market is fully leased up quickly. And here's a really good kicker, if trucking is in the tanks, all the trucks have to be parked right? There you go! 

Hi Robert. This is actually an interesting view, and admittedly I know nothing about this specific industry. I think the MHP I'm looking at wouldn't be a great fit given how far away it is from a major highway, but I like this idea. Do you have any recommendations or resources that I could look to in order to learn more?

Thanks for chiming in. 

 I'm in an industrial heavy market I'd look at that first and distribution markets. I'd read about zoning uses classified under mobile home parking. A lot of those are similar though. Parking lots and garages have always been known to perform well anywhere. Google probably. I honestly learned th most from studying them in my market. Visiting them, looking at the zoning uses, sizes, etc. They tend to be at least 7 acres and 10 is better. Urban is good or close proximity to acreage. I'm not sure what capacity you want to learn whether it is for development or other uses but this is a quick guide I found that would help that's pretty official it's a little outdated but just like any development experience and knowledge helps. I own a demolition and site work company that has transitioned to new construction so I've been in the space for years in columbus ohio. not sure what market you are in but I'd look where land is cheap. you are competing with love's around the country in rural areas so I would say urban or within 30 miles of urban is much better they don't build them that close. 

https://ops.fhwa.dot.gov/freight/infrastructure/truck_parkin...

[Robert Ellis]

Quote from @Logan M.:

Quote from @Robert Ellis:

Quote from @Logan M.:

Quote from @Robert Ellis:

Quote from @Jay Hinrichs:

other than the obvious land use rules. ( is this Oregon ).

the main thing we found when looking at land to do a park on in Oregon was Absorption.

A lot of money out to buy the dirt then the cost to set up the park which can run 20k plus per pad. then the time it takes to fill the park.

those are the calcs you have to run to see if its going to work.. Of course if your all cash drag and holding costs wont matter in the long run.

So for us they simply never pencil from ground up because of the cost and absorption time.

 All these mobile home park investors imagine if they opened up their minds to truck parking facilities and did all the same utility improvement, higher density for parking than mobile home, didn't have tenants, same on site manager. Much higher returns. 

 Trucking is going through a major contraction right now and if self-driving trucks ever become a thing you are out of business.

 you still have to park self driving trucks my friend ... and only some portions of trucking are going through a "contraction". Flat Bed is super strong, aggregates and trucking that supports new construction is extremely strong right now and is booming. I'm not sure if you know much about these industries than what you listen to on the news. Every truck parking facility that is built in our market is fully leased up quickly. And here's a really good kicker, if trucking is in the tanks, all the trucks have to be parked right? There you go! 

 Your last line is a great point. I am not saying that it doesn't have a use and won't have a future use but it is a lot easier to create a parking area than something with a higher barrier to enter. How long before it is overbuilt? I don't know the answer and maybe it will never get there. 

 No one is developing them it's too niche. it's more of a local developer type product but they are high cash flow and very low cost to operate and setup and you can pull out a lot of cash from refinance or sale. very little development. just focus away from rural markets you don't want to compete with overnight trucking. 

[Logan M.]

Quote from @Robert Ellis:

Quote from @Logan M.:

Quote from @Robert Ellis:

Quote from @Logan M.:

Quote from @Robert Ellis:

Quote from @Jay Hinrichs:

other than the obvious land use rules. ( is this Oregon ).

the main thing we found when looking at land to do a park on in Oregon was Absorption.

A lot of money out to buy the dirt then the cost to set up the park which can run 20k plus per pad. then the time it takes to fill the park.

those are the calcs you have to run to see if its going to work.. Of course if your all cash drag and holding costs wont matter in the long run.

So for us they simply never pencil from ground up because of the cost and absorption time.

 All these mobile home park investors imagine if they opened up their minds to truck parking facilities and did all the same utility improvement, higher density for parking than mobile home, didn't have tenants, same on site manager. Much higher returns. 

 Trucking is going through a major contraction right now and if self-driving trucks ever become a thing you are out of business.

 you still have to park self driving trucks my friend ... and only some portions of trucking are going through a "contraction". Flat Bed is super strong, aggregates and trucking that supports new construction is extremely strong right now and is booming. I'm not sure if you know much about these industries than what you listen to on the news. Every truck parking facility that is built in our market is fully leased up quickly. And here's a really good kicker, if trucking is in the tanks, all the trucks have to be parked right? There you go! 

 Your last line is a great point. I am not saying that it doesn't have a use and won't have a future use but it is a lot easier to create a parking area than something with a higher barrier to enter. How long before it is overbuilt? I don't know the answer and maybe it will never get there. 

 No one is developing them it's too niche. it's more of a local developer type product but they are high cash flow and very low cost to operate and setup and you can pull out a lot of cash from refinance or sale. very little development. just focus away from rural markets you don't want to compete with overnight trucking. 

 Great information, I image you are trying to buy within metro areas, probably light industrial zoning I would imagine.

[Robert Ellis]

Quote from @Logan M.:

Quote from @Robert Ellis:

Quote from @Logan M.:

Quote from @Robert Ellis:

Quote from @Logan M.:

Quote from @Robert Ellis:

Quote from @Jay Hinrichs:

other than the obvious land use rules. ( is this Oregon ).

the main thing we found when looking at land to do a park on in Oregon was Absorption.

A lot of money out to buy the dirt then the cost to set up the park which can run 20k plus per pad. then the time it takes to fill the park.

those are the calcs you have to run to see if its going to work.. Of course if your all cash drag and holding costs wont matter in the long run.

So for us they simply never pencil from ground up because of the cost and absorption time.

 All these mobile home park investors imagine if they opened up their minds to truck parking facilities and did all the same utility improvement, higher density for parking than mobile home, didn't have tenants, same on site manager. Much higher returns. 

 Trucking is going through a major contraction right now and if self-driving trucks ever become a thing you are out of business.

 you still have to park self driving trucks my friend ... and only some portions of trucking are going through a "contraction". Flat Bed is super strong, aggregates and trucking that supports new construction is extremely strong right now and is booming. I'm not sure if you know much about these industries than what you listen to on the news. Every truck parking facility that is built in our market is fully leased up quickly. And here's a really good kicker, if trucking is in the tanks, all the trucks have to be parked right? There you go! 

 Your last line is a great point. I am not saying that it doesn't have a use and won't have a future use but it is a lot easier to create a parking area than something with a higher barrier to enter. How long before it is overbuilt? I don't know the answer and maybe it will never get there. 

 No one is developing them it's too niche. it's more of a local developer type product but they are high cash flow and very low cost to operate and setup and you can pull out a lot of cash from refinance or sale. very little development. just focus away from rural markets you don't want to compete with overnight trucking. 

 Great information, I image you are trying to buy within metro areas, probably light industrial zoning I would imagine.

 Yes in our market it's just general M and then this would be a permitted use you'd apply for. I'd only look for existing zoning. Some times it's easy to split off from existing manufacturing they tend to have a lot of land.