All Forum Posts by: Frank Rolfe

Good basic idea but it does not work well in practice. If you advertise effectively "free homes" you will attract literally the homeless, who can also not pay lot rent. In addition, in many states you cannot sell homes "as is" under their "habitability" laws. Check with the state and see what condition a home has to be to sell. And you'll want to fix up the best home that's vacant -- the newest one that requires the least work -- and then advertise it for sale at a decent monthly cost (take the lot rent at full market plus maybe $200 per month). You could then take these affluent customers and "downsell" them into the older, worser homes at substantial savings (again based on habitability laws in your state). If you can get a customer to do the renovations for you, it makes them more of a stakeholder and saves you significant cash. 

I am assuming these homes are older than 1990. If they are 1990 or newer you could potentially finance them through 21st Mortgage, and they would cut you a check of at least $10,000 per home.

You need to change to a system of checks and money orders only. Collecting cash leads to embezzlement or robbery. I doubt you can get the residents to pay rent at Walmart -- and in some states you can't require any form of rent collection that is not on-property.

To form your decision I would 1) talk to your state mobile home association (MHA) and get the laws 2) consider the following the options A) pay check or money order to the manager B) mail the rent in to your P.O, Box. If this is a more affluent clientele, I would see if you could get them to do auto-deposit from their checking accounts.

The key to collections is to find the right fit with your customers so they pay on-time with anything but cash.

This is not really a mobile home park deal, right? It would be more accurately portrayed as 9 rent houses that just happen to be doublewides. 

I would think that what you should look into doing here is to surrender the titles to the doublewides to the state (which converts the mobile home to a real property asset) and then look at it as 9 single-family homes on 9 half-acre lots. When you look at it like that, you are paying around $30,000 per house and lot. Then evaluate that as a single-family home deal and see if it makes sense.

Mobile home parks are all about land ownership. In this case, that's the tail wagging the dog. The big asset here are the homes. You don't have enough scale with only 9 units to make any money from the land rent alone. 

The mobile home park market is still alive and well despite Covid-19 and urban unrest. It is barely consolidated (institutional investors only own roughly 4,000 of the 44,000 mobile home parks in the U.S.). But you are correct that 90% of the deals on-line are overpriced and the only way you'd buy one of those is if you could convince the seller to drop the price substantially (which does happen once it's been on the market awhile.

The top places to find a park today are:

#1 BROKERS. Of the 300+ parks we've bought, over 50% came from brokers (mostly pocket listings).

#2 COLD CALLING. This is where roughly 50% of the other half came from.

#3 DIRECT MAIL. This is where roughly the other half of the half came from.

Since the mobile home park market is weird and fragmented, your typical sources of deals will not be of much help. There is a little more effort required to successfully buy mobile home parks -- it's more like going to garage sales than buying out of a Neiman's catalog.

Go to the MHU website and you'll have hundreds of articles to read for free, as well as a ton of audio (around 500+ hours). Like anything else, the reality is much different than the basic concept, and you need to make sure that you are 100% on board with the business model as you dig deeper. I was only interested in the niche initially because I was 1) impressed by the fact that the industry is essentially restricted in supply in perpetuity and 2) the concept of seller financing. After I bought that first park, I learned that the business model was the best one that I had ever seen in my life, and that's when I went full speed ahead in building a portfolio of parks.

25 years later I am still convinced that mobile home parks are the best niche in real estate, as they play into all of the U.S. megatrends. The Covid-19 pandemic has once again reinforced the power of being in affordable housing.

Comps are less important with mobile home parks because they are an income property. Most single family homes are not income producing but rather for owner/occupants. Mobile home parks are seen strictly as income properties and the values are derived by a cap rate on the income. In your example, you actually could buy a mobile home park for $5,000 and sell if for $1,000,000 a day later if the property had $100,000 of income when you bought it for $5,000 and the seller was losing all that income by paying the manager an extra $100,000 per year and you then fired the manager and put it back on the market.

The general way to derive the value of a mobile home park is the following formula:

# occupied lots x lot rent x 12 x [.7 if tenants pay water/sewer and .6 if park pays] = NOI. You then apply a cap rate to the NOI and that's your value.

Mobile homes -- for the most part -- are all about affordable housing, so make sure not to "over-remodel" a model home. The customer is typically looking for safe, clean, affordable housing and are not expecting something off of HGTV That being said, you have to make sure the home matches your clientele. The mobile home industry is vast (roughly 8% of the U.S. population lives in a mobile home) and customers range from McDonald's employees to billionaires (in the Montauk park in the Hamptons) and even movie stars (Pam Anderson, Hillary Duff, etc. in Malibu).

Make sure you understand the rules from HUD on remodeling mobile homes, such as the fact that you can't enlarge windows or doors or increase the weight on the exterior walls (for example replacing paneling with drywall). Remember that mobile homes are inspected by HUD and you have to meet Federal criteria as well as state, county and local codes.

Also make sure you understand the SAFE Act and dealer requirements on selling homes in your state.

Perhaps the most profitable sector of mobile home investing is simply finding older homes that need just TLC with a seller that needs some fast cash. These type of deals are similar to the "quick car flips" you see on the Counting Cars show in which the guy finds classic cars that are filthy or need minor work and buy them from people who don't actually know what they're worth. In those cases you are making money using your mind and less about using your remodeling muscle -- that's a much easier lifestyle.

Before you even consider this deal, run a test ad in the largest metro paper that this park would serve. Put it in the classified section under "Mobile Homes For Rent' and put in that ad:

NAME OF TOWN THIS PARK IS IN. 2 and 3 bedroom mobile homes for sale or rent. From $795 per month -- includes lot rent. Call (XXX) XXX-XXXX.

Have the phone number a Google or Grasshopper disposable number. Run the ad for 10 days. After ten days, count up how many original calls you have (no repeats). If you have 30 or more calls then it might work. If it has 10 to 30 it's possible it might work but probably not, and under 10 forget it.

The $795 price is your lot rent at $425 per month plus the mortgage on a typical single wide at $30,000, reduced by a few dollars to sound better (would normally be $825 total).

I don't know all the details (and that report does not give many of the essential ones) but I can tell you that the expense ratio will be far higher than 25% (more like 30% to 40%) and that the cap rate is far too low to interest most people. But there are many components to a deal other than just the price, such as infrastructure, age of homes, location and potential rent increases, so there may be much here that is positive that I just can't guess from that summary report. 

Clearly you would NEVER want to buy a property that has negative cash flow and a negative ROI unless you have concrete steps to fix that immediately.

There's a loan broker called Cloverleaf Capital that does parks of any size. Call them.