1031 Exchange Decision: Duplex to Small Mobile Home Park

[Graham Bozarth]

I’m considering a 1031 exchange and would like feedback from investors who have experience with mobile home parks, particularly smaller, park-owned operations.

Current Property (Selling):

• Duplex purchased in 2021 for approximately $145,000; estimated current value around $210,000\

• Loan balance: about $90,000

• Gross rent: $2,400 per month

• NOI: approximately $16,000–$18,000 annually

• Cash flow after mortgage: around $750–800 per month

• Low management requirements and stable tenants

Replacement Property (Under Consideration):

• Seven-unit mobile home park

• Asking price: $395,000

• Rent: $750 per unit plus $40 for water (total $5,530 per month; $66,360 annually)

• 100% occupied with long-term tenants, several in place four to five years

• All homes are park-owned, purchased between 2016–2018 with metal roofs and Hardie siding

• Owner pays water and sewer (aerobic septic); tenants pay electric and trash

• Maintenance handled by one individual for $400 per month using personal equipment

• Gravel road, well maintained; potential to add one or two additional homes

My Pro Forma:

• Vacancy: 5%

• Expenses: approximately 40% of effective gross income (includes water, insurance, taxes, maintenance, mowing, etc.)

• Estimated NOI: $37,800

• Financing assumption: $255,000 loan at 8% interest, 25-year term

• Annual debt service: approximately $23,574

• Projected cash flow: about $14,250 annually ($1,188 per month)

• Cap rate: approximately 9.6%

• Cash-on-cash return: around 10% on $140,000 down

• DSCR: 1.6 (strong coverage)

If the price can be negotiated to the $360,000–$370,000 range, the cash-on-cash return improves to roughly 11–12%.

Pros:

• Consistent, well-maintained units with matching exteriors. Full occupancy with long-term tenants. Solid DSCR and reasonable cash flow. Potential upside through expansion or gradual rent increases. Opportunity to use 1031 equity for higher income potential.

Cons:

• All units are park-owned, which increases management and repair exposure. Owner pays water and sewer, creating potential variability in costs. No rent roll or historical utility data provided yet. Aerobic septic system may require periodic service and oversight Small scale (seven units) limits economies of scale

Question:
Would you trade a stable, low-maintenance duplex for a seven-unit, park-owned mobile home park with these numbers if:

1. The financials can be verified, The purchase price is brought down to around $360,000–$370,000, and You already have local maintenance support? In other words, does the higher cash flow justify the added management complexity and long-term maintenance exposure of a park-owned model at this size?

I’d appreciate honest, experience-based feedback, particularly from investors who have made a similar shift or currently operate smaller mobile home parks.

[Jordan Moorhead]

I love parks and duplexes both and wouldn't do this deal unless the park was close to you and you could convert some of those POH to TOH at rents close to what they're getting now.

What are the market lot rents where you are?

You would probably want a 50% expense ratio including vacancy on a park this small too.