I’d like to start out by saying that this site and its forum are very helpful for first time and prospective investors like myself, and I appreciate how candid and informative everyone is about the business of mobile home investing!
Okay, on to my questions:
I’ve seen a couple of empty parks for sale that have the developed lots but no homes on them at all.
Does anyone have any experience in buying parks that are completely empty? What are the pros/cons for buying a park in such a condition? Also, how do I calculate an empty park’s value without the benefit of knowing the NOI, cap rate, etc.?
I know that, initially, I wouldn’t have enough capital to fill up an entire park if I bought it, but I would have enough to buy/move-in a few mobile homes to sell in the park to start generating income. Are tenants who own their homes or renters wary of moving into empty parks, and are parks difficult to fill if they’re under a certain occupancy? Any advice would be greatly appreciated!
To a newbie (or even to most seasoned investors) an empty park will most likely become a pet alligator that will eat you alive. Development of any sort takes deep pockets or someone who shares the dream and has the money to back it up. This is one of the few areas that I personally think it does take money to make money so to speak…
To tackle this type of project you have to be able to cover the holding cost, building cost, inspection cost, and the cost of screw ups in that order. If a project won’t cashflow in three months I don’t want anything to do with the project period. to semi answer your question to value a property of this type on at CAP rate you are looking at a value of (number of lots) x 0, this shows you the current incomes worth. The land does have some inherent value but that’s it, if they want to sell it to me as a park it needs to have homes in it!
Most of the people that I consider to be on the edge of brilliant from this group recommend an occupancy rate of no less than 50% and I think this is sound advice. If there is no income how are you going to pay the bills?
It is for this same reason that I have personally stopped adding value to empty lots, it’s my effort that is going to fill them and I’m getting lazier and lazier in my old age…
the old adage does apply, “if it was easy everyone would be doing it” think long and had about this one! Deals are only easy on paper…
What you’re saying makes a lot of sense. It does seem like I’d have to pour a lot of money into the thing without getting any return–especially at the very beginning!
First question why is it empty? In my area several smaller parks shut down and cleared out and marketed themselves as multi-family development property then market sinks and they are sitting there with continuing expenses but no income. Might want to seek out an experienced partner to help.
First off, you really need to know that the local market will support the added housing at a rate that would be profitable, and you would really need to know the business inside and out. If these items were the case here is a way to fill an empty park…and by the way, I believe will become more common as the used house/ repo supply continues to tighten. 21st mortgage can provide floorplan lending, and retail financing that involves some recourse. basically you set up a bonafide dealership- selling new homes in your park…obviously, you need not fill every lot, but you probably would need to start with 10 or so. Sell one - order another, repeat. This won’t be easy, but once you get a bit of momentum, you could carve out a niche in your local market