All TOH but a Majority 70s & 80s Models In Rough Shape

Hey Folks,

Wanted to ask your opinions on the following:

We are looking at a stabilized park 100+pads, strong metro, municipal water & sewer, that are almost completely TOH with occupancy in the 90s at a 6.5CAP

The only concern we have is that all the homes although they are TOH are mostly 70s & 80s models, some in pretty rough shape.

In your experience/opinion do these older homes have a higher correlation (than 14YR industry average turnover rate) with becoming abandoned ?

What are some of the considerations you would take into account when looking at the above scenario ?

I got one experienced operator saying - Stay away , they will all become abandoned over the next couple years and ultimately a $2K liability + trying to find a smaller home that fits these smaller lots etc…

@frankrolfe seems to think that the occupants have been there for the last 30 years and will stick around for the next 30 years and although they don’t look livable to me, the current inhabitants have gotten accustomed to living in homes that are falling apart. And that the tenants don’t have any payments left on those older homes. In addition, this is there only place to live as they have no other cheaper options so really not a concern.

Your perspective & balanced view on this would be invaluable to me


My two cents:

I can only speak from my experience. Our first MHP was/is in the condition you are describing. It has 93 lots, and some of them were from the 50s! Here are some additional things to think about while making your decision:

  1. Renovation is always an option when people move out. However, keep in mind that homes built prior to 1976 are pre-HUD homes, which means that most are poorly built, and they would not qualify for financing if you wish to sell them.
  2. Frank says that he removes all homes that require more than 10k of renovation, but we have remodeled many for around 15k and sold them for over 20k. We then sell them as rent to owns. For this MHP, it isn’t easy to sell homes over 35k.
  3. Depending on the type of community you have, you may find many people looking for a cheap home. There is a high likelihood that those homes will not sit abandoned.
  4. Look into partnering with a local home dealer. We have relationships with two dealers who are willing to place one home at a time with no cost to us. These homes sit anywhere from 1-6 months before they sell depending on the location of the lot.
  5. You really need to just find something that works for you. The community you are describing would seen by some as a lemon and a gem to others. This community will probably require a little more hands on management, which isn’t necessarily a bad thing! It just requires a different mindset.
  6. That CAP seems low unless you know current rents are way under the going market in your area. If you are not planning on raising rents quickly, I am not sure you will find a bank willing to give you a loan unless you have a lot of equity elsewhere and a sizable down payment.
  7. Obviously these thoughts are only the tip of the iceberg when deciding whether this MHP is right for you.
  8. Keep in mind, I am only one opinion. Seek out as many opinions as you can! More information is always best.

Good luck! I wish you well :slight_smile:


Thank you so much! @EricBarshinger Really good advice in there! Will definitely take those into consideration!
Wonder if anyone else has any experience with older TOH’s and whether they become abandon at a quicker pace ?

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If the park has a lot of old homes that don’t appear to be well kept, some of them will get abandoned every few years, and some of the abandoned homes will cost more to renovate than they are worth.

When underwriting the park, I would underwrite some of the existing tenants disappearing over time, and the lots becoming empty lots until replaced with a new or used home. I would also include a reserve for the demolition and cleanup of homes that get abandoned.

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Agree with these comments- suggest you use rules enforcement to encourage renovation and possibly contribute a few dollars to help seniors or disability
Some local non profits help on winterizing and energy savings

Hey just a couple things to think about:

  1. That cap is seriously low. Unless you can buy it and double your rents to get it into double digits then I’d pass. I come from the commercial real estate world so let me offer this perspective: you can buy a mobile home park, complete with all the fun that management or managing the manager entails, at a 6.5 cap OR you can buy a 20 year Walgreens lease at 6 cap and it’s literally mailbox money. I don’t know about you, but I think I’d take the mailbox money.
  2. Exit strategy - Best case scenario is that the homes can, with minimal time and money, be made nice/rehabbed. So what then? If you hold the park 5 years and then sell it then you still have a bunch of old homes but now you’ve spend some time and money putting lipstick on them. We, along with a lot of other park owners out there, put a discount on parks with a lot of older homes. It’s inevitable that somebody is going to have to demo those homes and replace them.
  3. Separate the value of the lots and homes. Cap the lot rent at whatever you like and subtract that from your purchase price. The remainder is what you’re paying for the homes. I know this is a “lot rent only park” but any experienced park owner will tell you that some of those homes will be yours eventually. So the question becomes, WHEN that house becomes yours, did you overpay?

We’ve got 150 pads in NC and we have 4 homes with rolled roofs and the only reason they’re still there is because we renovated them for about $5,000 each. Also keep in mind that your price point is directly related to the quality of resident you get. All of our parks are some of the higher price points in the market but we’ve got great tenants that take pride in what they have. The single guy that just needs a place to crash and pays you $500 per month probably doesn’t care what his house looks like.

Like the others said, this is just another opinion, but if it were me I’d buy a Walgreens for the money and enjoy the income from a beach chair! Leave the 6 caps to the institutional guys!

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We purchased a 47 space park 3 years ago that was mostly 70’s homes with some 90’s sprinkled in. We evicted a third of the park. We’ve remodeled a half dozen and torn down another 5. We spent $10K remodeling one of the few 90’s models in the park and sold it in 3 days last month. We’ve take 70’s homes and done the same thing. Lot rent is the same, whether it’s a new home or old.

The power of an old, affordable home is astonishing. We have advertised old homes and had 50 calls in two days. Since we took over the park and kicked out the drugs and troublemakers, we’ve seen many of the existing tenant base spend thousands of dollars on their old 70’s home. When they see the new owners improving the park with new asphalt, new landscaping, new homes and NEW RULES, they start caring about their property.

Next thing you know, that dumpy 1979 Duke trailer at the end of the park has been painted, has new skirting and roof and brand new boxwood bushes at the front of the house. A renovated, old home looks just as good as a new one, IMO…sometimes even better.

Don’t discount those old homes. They don’t bother me one bit.



From a risk perspective, older deferred maintenance homes owned by the community cause a disproportionate share of catastrophic liability losses for park owners ex. fire deaths in homes, carbon monoxide poisonings, falling through rotted particle board flooring… Accordingly, insurance terms are both more expensive and less comprehensive with coverage. That said, older homes in the park do not generally create additional liability risk for park owners, though community appearance will affect insurance availability.

Thank you all! Really good insight all around!

You piqued my interest with the idea of “…buy a Walgreens…and enjoy the income from a beach chair!”. Having just come from a weekend at Cape Cod, and seeing how much work MHP’s can be…I’d like to find out more about that line of investing. Have you done it? How can I research more about it? What kind of money does it cost to get started? What sort of financing is available? And any other info. THANKS!

@jandg081377 we invest in MHPs but are also commercial developers. There’s no shortage of NNN investments out there but you’ve got to have the cash to invest. Message me if you have any questions!

I think that it totally depends on the strength of the market the park is in and what is the upside in rental rates, etc that would change it from a 6.5 cap to a higher cap rate. If there is not a lot of upside, I can’t disagree with the benefits of putting your money elsewhere. However, I do not share the same fear that a number of the other posters have about the possibility of needing to replace homes. While having to replace homes has higher capital requirements, there is significant upside to POH which you are eventually selling off. We routinely get a cash on cash return from these around 20% much of which is shielded early on due to the rapid depreciation of the homes.

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Thanks for that insight!
@Markaustin do you depreciate the homes on a 5 year schedule or 27.5 year schedule ?

You are legally required to depreciate homes on a 27.5 year schedule. If you want to you can separate out he carpets, the appliances, ect and depreciate them on a faster schedules, but that might be a lot of effort if it is not a large number of units.