I risk fanning the flames of a heated discussion but I agree with Greg.
MHU teaches that mobile Home parks are bought and sold as investments valued on their “cap rate.” Most investors here agree with that philosophy. The investment consists of a capital investment (the purchase) chosen for its predictable stream of cash flows. As Warren Buffet, perhaps the most successful investor of all time, has said: The value of an enterprise is the discounted present value of its stream of future cash flows, and nothing else.
I invest in MHP’s because the risk-reward ratio is, for various reasons primarily related to asymmetry of information, disproportionately low. That is, the expected reward is relatively high for its variance (not much can go wrong). This forum is part of MHU seeking to “level the playing field” by bringing together common wisdom earned through experience.
What you are suggesting is speculation. There are successful speculators out there, but it is not the same as investing – or, to the extent it is, it is higher risk (the variation in outcomes is greater). A brand-new 100-space MHP may take 1 year to fill, or 10 years, or 100 years if managed incorrectly. The fill rate determines the reward and there is a lot of risk (variance) in the potential outcomes. You also suggest that you have special insight into why this speculation is worth the risk (the payoff will be yooge!). Maybe.
The low risk-reward ratio for MHP’s goes up dramatically if you pay for something OTHER than the cash flow. The cash flow is worth trading for an investment (at some cap rate). But a current return of $0 (or less than zero, since you must pay taxes and insurance and overhead before you have single customer) cannot have a positive value (unless the interest rate goes negative).
True, the land is worth something, but the owner must bring in pads and poles as you say (a nice turn of phrase) and, in addition, it is everyone’s experience here that the owner must bring in the homes as well – the customer rarely brings their own home. That’s more akin to playing the lottery – will people want to live in my MHP at rents that make me a profit? That is a question no-one on this forum will have any particular insight into since it’s a pure bet on the market dynamics whether the “highest and best use” of land will be a MHP and not something else (a residential subdivision or a hotel or a shopping center or whatever). You have to look at the comps to determine this and of course, yes that is where local expertise is valuable. So sell to someone local.
I agree with you that zoning is worth something, but very little since the cost of developing a MHP is typically greater than the cost of rehabilitating one, which is something that information and expertise can address. Unlike market conditions, which this forum wouldn’t logically have any special insight into. Even Donald Trump has gone bankrupt speculating on market conditions and he is regarded as a wildly successful real estate mogul. I think most people on this forum would buy the “park next door” based on a cap rate before speculating on the vacant land to expand into.
To put it in numbers, if development of 6 spaces per acre (good modern density) costs $10k per space (low) and a home costs $25k (low) per space, you’re already out of pocket more than $650k to develop the first 18 spaces.
Investing $650 for the land & zoning and $650 for 18 spaces, you’re in for $1.3 million and you might have (on a good day)? $18,000 gross per month if you rent your homes. You’ll have a relatively high expense ratio of 50% so figure $9k per month or $108k per year on your investment of $1.3 million, or a cap rate of 8.3%. Why take the risk?
Or, you could plan to sell (brand-new) homes @ $50k each (good luck) and make $15k per home after you’ve sold out the first thirty or so home lots. That’s a lot of effort to make just a little profit.
In short (not my strong suit), you walked into a den of lions trying to sell them on the idea of starting a zebra ranch. Sure, it might be a good idea. But it’s the rare lion who wants to tend a ranch.