The gist is I have 40 acres in East Texas fully paid. The town it’s in is about 40 minutes away from Tyler, which is a growing city (100 thousand in city and counting). The location of the town with acres is very small, (under 10,000). I’ve been wanting to open up a park and was needing counciling. What are the expected expenses I can anticipate when opening? Time frame I should expect from installation of utilities? Is a brand new park in a location like this a smart investment or would purchasing an existing park a better use of resources?
Own 40 acres. Thinking about starting up a Mobile Park. What startup costs do I need to take into consideration? Pros/cons? Need advice
First of all you’ll have to get the politicians on board, which is not easy. There will be regulations you have to follow, so get a copy of those. Then follow up by asking the City what the utility tap fees will be and get some idea of what roads and utilities will cost ($$$), what density you’ll be allowed, and put some numbers together. For example, say you can put in 8 homes per acre after you satisfy all requirements. So you can develop 320 sites.
Figure out whether you’re looking at $20k per lot to develop or $40k per lot. Of course you can develop in phases, maybe 50 lots at a time? Then add the cost of buying homes to resell or rent ($40k for single?) and compare the local comps on what MHPs are selling for or renting lots for. You need real numbers. After you have the numbers you can decide if all the hassle and capital outlay and risk and time value of money is justified by any potential profit. You’ll need deep pockets but the profit may justify the outlay. Or it may not. Or it may be a long slog just to get out with your money back. Who knows!?
Building a new community is usually the most profitable however, there will be initial operating losses such as negative operating expenses plus interest on the financing (if used) which will accumulate until the break even cash flow point. To some degree, these operating losses could be offset by home sales if you want to get into the retail business side. Yes it’s more complicated, but with Legacy and 21st Mortgages home financing/leasing programs, much of the aspects of permitting and home installation are handled for you. And if you are not in a hurry, you may wish to consider private lenders with the FHA207m loan guarantee program,.
That’s a good point. There is attractive financing for this sort of thing. @Easteddie is an expert on this.
If you have major investment gains to offset, harvesting the tax losses can be beneficial.
There is also a provision in the new tax code for investment opportunity zones which have tax-favorable characteristics.
But don’t let the tax tail drive the deal dog.