How does one build a MH park?


#1

Hi everybody,

There seems to be a lot of talk about “working the deals” once you own a mobile home park or, selling MHs and taking back notes, or acquiring existing parks…but, nowhere have I heard how a person could go about starting a new park.

Would it be okay to pose this question here? I would really like to know.

I live here in Virginia and would like to build a small park of maybe 12 pads initially and then leave enough acreage for about 20 more.

So, to get started (assuming that I already have the investor cash to support me in this effort) how do I go about picking out the land to build it on? I realize in some counties they already have Zoning codes that must be adhered to…am I limited to one of these “approved” zoning lot parcels or can I convert…let’s say maybe an Agricultural lot parcel into a “approved” county zoning code parcel?

Do you guys have any ideas?

Also, where could I find any good information on the web that talks specifically about mobile home park water/treatment facilities? I am aware that some in my area are tied right into public water and sewer but, last week I was traveling down in the Northern Neck of Virginia and drove through a park of about 60 pads that had a huge above ground tank…what’s that all about?

Thanks in advance for answering my questions and please pardon the “newbie” talk. :slight_smile:

-Keith


#2

In theory, starting a community from scratch is probably a good way to go. You can do everything right and make a really nice place that would attract people. However, IMHO I do not think it will ever happen for the simple reason that municipalities don’t want these places anymore.

I cannot speak for your area but I am painfully familiar with the new laws in PA and OH. There is not other way to describe them other than draconian, especially in PA. No need to go into detail but it looks like the cost to install a new pad (or to replace an existing pad once a home is moved out) makes no economic sense given the rents received. In other words, you would die long before you recoup your investment. OH is not quite as bad but what I have to do to pass inspections for placing new homes is really going to hurt. Other states seem to be also toughening up their laws regarding standards for communities.

Given the above, why fight this trend? Better to buy a place already running and grandfathered in and then fix it up the way you want to. Turning a rundown community around will immediately put the local powers-that-be on your side and isn’t that where you really want to have them? You’re going to get a lot more flexibiity from people who can make or break your project and come out better $wise in the long run.

Don’t forget that an existing community also means at least some kind of income stream from day 1. My personal opinion is that it is easier to attact people to something already existing than it is to get people to move into a brand new development.

It really gets down to running the numbers on both scenarios and that takes some serious education and probably expense on your part. You may have to buy an engineer’s/architect’s/developer’s time to come up with some rough numbers (put in a really big contingency factor) for a brand new development and see how this works out given space rents in your target area. Do the same for an existing community and see how that pencils out. I hope you plan on attending the MOM in Troy, AL, this coming week-end. Just listening to people in this business should go a long way to answering your questions.

Rolf


#3

Keith

Most of the experts do not recommend building a park from scratch for many reasons that Rolf has mentioned above. Cost is one of the most prominent. It is very difficult to make the numbers work. Let me use my town as an example.

My town has 32k people and my county has 70k people, clearly very rural. Even here there is bureaucracy. No new mobile homes are allowed on lots in town, only those grandfathered in. The county has county water but no sewer. So you need a septic for each mh on a lot of 25k sq feet, a bit more than .5 acre. For once I agree with the government. There are just as many people living in a mh as a house, so they require the same septic system. The county frowns on lagoons & similar things.

Here are some conservative rough costs per lot:

septic$3k

electric pole, etc$1k Does not count the main line(s) through the park.

water line$1k Does not count the main line through the park.

land$2-5k per acre, if you can find relatively flat land

A few years ago I talked to Planning & Zoning & they mentioned they wanted a blacktop road that meets county specs. I am not sure how serious they are, but at least you need a gravel road. One tri-axel full of gravel is $250 & it does not cover much. This does not count any soft costs like interest, taxes, legal fees, surveys, inspection fees, etc. While you are jumping through the hoops, the meter is running. (Don’t even think about a blacktop road.)

All the above are costs so what about the income? Lot rents here are $150-$200/month, so it would take you a very long time to recover your costs, even assuming that you found tenants to move into your park. Filling your park would probably take quite a while. This does not even consider that you might put mobile homes in place to sell or rent. Renting a 3 br mh would give you about $500 a month but acquiring the units would be another significant cost. Location is a problem since most folks work in town so they do not want to live too far out.

Of course these are my costs here but they give you a feel for the expense/income ratios.

Dennis


#4

Rolf and Dennis,

Great, well thought out responses on development.

Keith,

I think a better and more profitable plan would be to develop a manufactured housing subdivision. If you could get away with 1/2 acre lots and still make the numbers work it’s really the only viable way to develop these days in this business. You could even finance these (much higher value than mobiles in parks) and create a long term income stream.

Steve


#5

Hi, I have gotten some excellent information from Greg Meade (mostly) and others. Our research into the mobile home parks prospects in central Fl. confirm pretty much what you guys are saying. That is why we have made an offer on 18 lots in Ocala Fl near town. These lots are quarter acres that will require development, well, septic, fees etc so we figure the cost to get ready for mobile is around 18 to 20 thousand, then around 10 to 12 thousand for mobile, 6 thousand to set up. Roughly the cost will be around 50 thousand to get the mobile ready to rent at 750 monthly. 18x750 = 13500 x 12 =162000 yearly. With all the infrasturcture cost associated with start up a new or the cost of an existing park the cost to buy the lots at 18 thousand per lot (again for quarter acre) and the cost to get the mobile up and ready to go is doable.

We plan on using owner financing and using Tony and Scotts land bank method to develop the property. Do not want to make this a unreadable long post but so far the numbers we run show it is a long term winner IF we can get the owner to hold the financing with a major down payment from us. The real bonus is this land is zoned for SFH and mobiles so in ten years or whenever the mobiles have depreciated and the land greatly appreciated (it is Florida) we can sell out. It is worth the risk and effort to us as we think given the information we have researched it is better than an old park, As Tony writes often even if we buy and we need to get out we will have 3 exit strategies, rent, sell, borrow, develope as money available .

Just our thoughts and research into what may work for us.  We plan on going to the MOM meeting in Al. and learn more.  Good luck Theresa and Stan

#6

Keith, your question is analogous to a youngster aspiring to be a pro