We purchased a 63 space park in South Dakota 4 1/2 years ago. Since the purchase, we have evicted 13 investor owned homes that were poorly maintained and brought in 2007-2012 homes of better quality. I have 4 more that I would like to switch out this summer. We have sold a few to homeowners and have buyers requesting homes in our park.
My question is, as mobile home park investors, is it more attractive to you as a potential buyer to have park owned homes that are well maintained or to be happy receiving just lot rent?
One of the main reasons why many of us like mobile home parks is the simplicity of renting land. Others have elaborated on this for years.
Mobile home parks are also attractive due to economies of scale. The more lots the better. In theory and oversimplifying things, one could argue you can buy roughly 3 TOH lots for the price of 2 POH lot. If all of this is true, then an investor would be better off buying TOH lots. However, if an investor can get a great deal on PHOs, then this could provide an opportunity.
We have attempted to separate the “homes” side of the business from the “park” side. The “homes” side can make money, if you have a critical mass, but it can be a money pit as well. You have to be careful as a buyer to value the homes at their real economic value, not on the basis of their income stream capitalized.