I am in the process of putting a park under contract in Virginia. In researching this MHP I found that it sold in 2015, then in April 2018 it was sold as a foreclosure.
My question is how to do a proper due diligence on the MHP since I’m fairly certain the current owner has very little historical information on the park since it was purchased as is?
This would be my first park. Here are the details on the park.
22 lots total - 19 TOH, 2 POH (Vacant), 1 vacant lot
Current lot rents $300
20 acres total land. MHP occupies 8 acres. The rest is wooded.
Current taxes are $2000/yr
city water and sewer which get billed directly from the town at a flat rate for 0-5000 gallons
Electric gets billed directly to tenants from electric company
in small town but metro >100k people and housing >180k, 3 bdrm rents in town >1000/mnth
Your best source of information will be the tenants. As part of your contract you need to stipulate that you have permission to speak with them. A couple other areas to focus: the city could also have good history as it relates to compliance with city ordinances. Local law enforcement might have tidbits on problem tenants.
Also the title commitment would help give you a good handle on any problem areas in the exclusions section. We don’t talk about this much on the forum, but if you don’t have a good title company (you trust), consider an attorney to help you clear exclusions as some of these title companies try to exclude everything and make your owner’s policy useless.
Ultimately history is interesting, but it should not detract from your need to conduct a thorough assessment of the park, the operations, and the improvements you will be responsible to maintain. Looks like a good market based on what you said.
Like @jhutson I think the tenants are going to be your best source of information. Get ready for them to tell you all kinds of things, true and untrue, and information you didn’t ask for. Depending on what info you gather there and how much they are asking for the park as to whether you take the risk not knowing the other stuff. My first park was like that. Owner hadn’t paid taxes in 3 years, the water had been cut off to the residents for 4 months, and garbage hadn’t been taken off in 6 months. But the price of the park was so good that a lot of stuff could go wrong and I’d still been ok.
It sounds like a red flag but that just means you have to work through it. Do you know the backstory? Can you get in touch with the last owner? Can you talk to the owner that got foreclosed on? While its not something you might be able to do , i would try. Check the recorders office or if is online grab the docs and see if you can get a hold of the old owners. Might not be possible but you can start using the google to see what you can find.
I tried to buy a park one time ( actually got it under contract later and fell apart for different reasons) but the first time he sold it out from underneath my feet owner financed. For the heck of it i followup up with him or the park ( cant remember which) and he took it back ! Can you believe that , 6 months and took it back. Sounds like a scam to pull a down payment from a buyer. I actually called this issue in on a frank show call. But then doing the research on the purchaser , i found out that he and a buddy had done a little insurance fraud where they structure a scenario where a car gets damaged to collect on insurance proceeds . So they did and was determined to fraud, and there was jail time. See what you can make f the story here on all avenues that you may explore ( also see if a lien was recorded and talk to the lender as well if you can work it down the chain to maybe talk to the initial underwriter or loan officer (assuming the park is being sold by an intermediary and not directly through the lender) .
Depending on what info you gather there and how much they are asking for the park as to whether you take the risk not knowing the other stuff. My first park was like that. Owner hadn’t paid taxes in 3 years, the water had been cut off to the residents for 4 months, and garbage hadn’t been taken off in 6 months. But the price of the park was so good that a lot of stuff could go wrong and I’d still been ok.