I am NOT sure but, am I ready to buy my first MHP? i would love hear from your experience as you purchased your first MHP. What should I do and NOT do, at what market is the best market to get into as a first time buyer, any thoughts? Mobile Home Park Investing: A Strategic Alternative to Multifamily Apartments?
Your first deal will be the hardest deal to close. I have helped several people buy their first park, and I have seen it firsthand—the doubt, the anxiety, the uncertainty, etc.
My suggestion is to review 100 or more deals before making an offer. Run the numbers, look at the area, and imagine yourself owning some parks. Think about what, why, and how you want to buy each park.
Ie, this park is a good turnaround deal; it’s going to take me 5 years, but once I am done, it will be worth XYZ amount more than I paid for it.
Or, this park is a steady eddy park —no major repairs needed. Incubate the park, make minor, measured improvements, and watch the rents slowly go up.
A few things for FYI:
- Park-owned Home income trap. Some folks will allow the POH income to be capitalized into the numbers. This is a mistake. Just value the Rent. I remove all other income sources when I run my numbers. No late charge income, no Vending income, no storage income. Those are ancillary to the core business. If the seller insists on added value, then use 2x the trailing 12. NEVER CAP those extra income sources.
- Pro-Forma Numbers. Do not value a park based on the future of what it could be. IE, the park has a 10% vacancy rate, yet they are valuing it as if it were full. If it were that easy to fill the vacancies, then why didn’t the seller do it? You need to get paid for those efforts. Same with “Year One” numbers. “The rents will be $50/month higher next year”. Once again, if you use these numbers, you are paying the seller for something that has not happened yet.
- Well and Septic parks: I suggest you avoid these for first-time park owners. You are already facing a pretty steep learning curve when you purchase the park—no need to add to the learning curve. If you are already comfortable with either or both, then go ahead, but City Utility parks are WAY easier to run than Private Utility parks.
- Due Diligence: I’d rather see you spend $2500 on DD and not buy a park than skip it and end up paying hundreds of thousands fixing something that should have been caught. IE, bad sewer lines, electrical lines, water lines, failing septic systems. I know it’s hard to swallow spending $2500 or more on an inspection, but trust me, in the long run, it’s worth it.
There is a lot more to the game, and these are just some things to watch for. Post your deals on the forum, and there are numerous highly qualified owner/operators here that can chime in.
Hey, thank you for your tips here, these is very valuable and i appreciate that. I am learning a lot in the forum, building my pathway to purchase my first MHP - Cheers!
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