Old, occupied, Pre-HUD Homes - Determining if they are Junk vs. Salvageable during Due Diligence


We have a park in Omaha NE under contract. All of the homes are tenant owned. The homes are very old - most if not all of them are pre-hud, and a lot of them are in very bad shape. The park is mis-managed, and the demographic is pretty low income, so we think that a fair amount of existing tenants would end up abandoning with no pay no stay + enforcing rules. It’s hard for us to determine right now exactly how many of the homes would need to be scrapped if tenants abandoned the homes, but we know for sure it will be some. Our concern would be that we buy the park and 10 of 38 tenants move out, and 8/10 of those homes need to be scrapped (on top of this, a lot of our lots are small, so we would need to find smaller homes for some of these). If we think that is probable, we would have to lower our contract price to be comfortable w/ this purchase. Does anyone have any experience or advice on how to getter a better idea of whether or not homes are salvageable based on just walking the exterior of these homes? Anything specific to look for? (roof, siding, etc).


I am pretty sure that is the same park I had my manager look at and photograph. I saw the same problem you are writing about - a lot of homes squeezed together with most at the end of their life, unless you want to dump a ton of money into each of them. And if you pull them out, you will have a hard time finding homes to fit on the small lots.

There might not be a solution to that problem. I would also call the fire department and see if there is enough clearance between the homes. That could really put you in a hard place if not.

But as I remember the rents are something like $150 and some parks in Omaha are hitting $400.


What a mess.

In addition to @Randy_CA’s comments, think about the electric panels and meter loops you might have to upgrade if you can replace these units. Check with the city on the code violations as a lot of the homes could be condemned. Confirm you can get the insurance you need as there seems to be increased liability for the owner. Water and sewer lines in parks like this are commonly end of life, and a large capital expense. How’s the gas out there?

You can still find some 10 and 12 foot wide homes, but not often. Might need to resort to Park Model RV’s, if allowed by the city.

I would not consider lot rent income for any home that, if abandoned, could not be reasonably repaired, and might also deduct a couple grand on top of that to throw it in a dumpster.

Once I had a Park under contract in San Antonio that were all POH. There was a 5K offset for each home without a title. None of the homes had titles. We couldn’t work out the difference because the Seller was going to have to pay me to take the Park.