Should I not Cap the lots that are in arrears?


I am in contract on a park and some tenant are in significant arrears.
How do I price those lots? Should I discount the entire lot from the offer or discount the eviction cost etc?
Thanks so much for you help.


@Dani There is no clear answer hear. Some might pay , some might skip. Id be doubtful you could get the seller to agree to give no value to the lots. You might get some to redeem when you enforce no pay no stay. Then weigh whats going to happen when they move out. Will the move their home? Maybe not… Will the homes have negative value( you will have to demolish them and then have a vacant lot). Will they be abandoned and you can get title and get some money out of them? You’ll ultimately decide if you feel you need a concession and if the seller will agree to it.


Thanks Marvel.

I should have been clearer. The bulk of the homes that have significant owed balances are POH.
That is, he rents a home for $700 and I calculate the lot portion to be $345 (comps to others TOH in the same park).

I capped that all lots at 9.5%. (34512.6/0.095) = $26,147. What is the standard for dealing with POH that are in arrears? Should I negotiate a $26k reduction in the offer price to homes are significant arrears? Or should I negotiate for a less amount because of the eviction rent ready costs that are about to head my way?

Frank says only pay for occupied lots. This could be worse than an occupied lot…

Thanks again!


I think you need to contrast what you will have to pay for a park against where you will take it and how much it will cost you to take it there. It is possible for there to be a big problem like you describe, but through a combination of raising rents, filling lots and cleaning out the deadbeats, you can be greatly rewarded. Perhaps you may overpay due to some issues, but if there is a tremendous untapped upside it may be worth it.

But of course it can be the case that the above is not true. If the rents are at market, and the lots are all filled with junkers I would not see room for a gain. Throw in the problem you described and the deal is no deal.


Interesting points.

The deal with this park is that there are significant POH’s that I intend to sell.

Lot rents seem to be at market, maybe there is a little space up, but not much. The park is 100% occupied so there is no chance at upside there.

The one value add that I can see is that it isn’t sub metered yet.

On top of all this the park is in a weird market. Small coastal town nit near a Walmart but the test ads pull in about 10 per week. Population is 6.6k , Median Home is 165k, 4.4% unemployment.


Whats your metro size?

Side note- If your coastal make sure your insurance coverage reflects all your POH


The number 1 most powerful way to make capital gains with income producing properties is to raise rents. MHP parks also have the advantage of being able to fill vacant lots. It is the same as buying an apartment building and building more units on some unused land. But with MHPs it is much easier to do and can be done at no cost, since you sell off the homes you move in and recover your capital.

If you are looking at building your net worth you need to find properties which allow you to raise rents. You can do the same thing with apartments but dollar for dollar you will have more units to raise rents on in MHPs then in apartments.

If you are happy with your net worth and your goal is not more, but instead, producing an income from the capital you have, go ahead and purchase a filled park with rents at market and spend your days collecting rents and paying bills.


As far as charging the residents of the park for their water usage run this simple calculation:

One month’s average water bill x 12/.09 = the maximum capital gain such a thing will add to the value of the property.

But of course you will not hit that maximum because you will have to pay for the meter installation and there will be some water that runs through your meter that will not be billed to the residents.

My guess is that the capital gain you could realize from a water bill back is not a big enough of a life changing gain in itself to make the deal worth it, if indeed, it is capital gains that you are looking for.


Very Interesting points Randy.

For this park I am looking at it as more of as an income producing property. Is that a bad thing? Everyone would like to have a higher net worth, but I have a full time job which is primarily responsible for my net worth as it stands currently and I intend to have this park professionally managed.

If I can manage to lift rents a little over time and bill the water (and possibly sewer) usage back to the tenants which is essentially raising rents then it could justify capital gains type investment I suppose.

My intention is to pull out capital from the park by selling the homes to invest in another park in the near future.

The park is not in a “Metro Area”, the county population is 40k, Median Home 140k, Unemployment 3.8%.
Bangor Metro Area (about 35 miles away - 55 min) is the nearest Metro Area with a population of 152k, 3.8% unemployment and Median Home 120k

Thanks for the heads up on the insurance.

Thanks for all the valuable input.


So the arrears are not as bad as I was expecting. So I may do nothing on that front

The current owner has been running the park at between 50-60% expense ratio. He increased lot rents in the summer of 2017 from $295 to $345 and wants to increase them again in April or May etc…

Am I making a mistake to cap the lot rent at 345? Should I cap it at a lower number being that he hasn’t seasoned a $345 lot rent yet?

Thanks so much for the help!