Best Approach to Maximize Lot Value

Greetings,

Proud new (relatively) owner here of a small park in California (+/- 20 spaces). Have experienced with another larger 100+ space park in the opposite part of the state.

Given the new law prohibiting park owned rentals we are going to sell the existing park owned home. The existing tenant has given notice and is moving out at the end of the month.

The park is in pretty high demand and we often field calls for people looking to move in. There are not frequently vacancies and when an existing owner sells the homes normally go pretty fast. Typical sale price/value estimates for existing homes is $75-$125K or closer to $150-$175K for new (basic doublewide).

The existing home is a 70s era and in pretty poor condition. I don’t expect much resale value (as is) and we’ll likely agree to let someone pull it in exchange for the cost to safely remove it.

We had previously considered installing a new home (simple doublewide) on the space then selling but with the new home prices up 30%+ where they were last year there is not a large margin to make it clearly worthwhile. I do realize the benefit of getting a home there and collecting rent.

Given the level of interest we’ve had so far in the “space”, I’m tempted to pull out the old home and just put a for sale sign on the lot. I know there are differences of opinion on how to value the dirt but in this scenario if we can generate $25K-$30K on the lot, without any need to prep or install a new home (and expose ourselves to the market risk profit wise), it seems like it may be a worthwhile consideration.

The way I see it, we have three options and I’m trying to identify how to maximize the value.

Pull out existing and install new.
New home cost estimated +/- $130K, resale value $175-$200K, less sale costs.

Sell vacant lot
Not sure on what we can get (per above).

Pre-purchase spec sale
Sell lot to a party for a fixed price for pre-determined home. We’ve done this in the past but it always gets dicey dealing with a (controlling) buyer. They do get the warranty though which is nice.

Curious to get any feedback here on how we might maximize value. The goal is to reinvest 100% of the proceeds back into capital improvements.

Thanks,

A

What is the new law prohibiting Park owned rentals in California?

It is a proposed law.

Yes, correct, AB 861. I should have stated the proposed rule. Here are details.

Bill Text - AB-861 Mobilehome parks: rental restrictions: management. (ca.gov)

Although it might not have much value, why not just try to sell it as is? Does it need a rehab? Why go through the headache of spending money on the lot via moving a home off the lot. If demand is so high, give it 1-2 months on the market as is. If it doesn’t sell after than point, than look into pulling it and understanding why it isn’t selling. Unless this is such an eyesore that it is effecting the value of the park (which, considering homes sell for over $100,000 per your post, I don’t think that is the case). This park seems like it is in an area where affordable housing demand is extremely high - you may surprise yourself and not have an issue selling a home.

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Thanks for the response. This is good feedback and certainly a good 4th option. The only hesitation in that regard is getting it into suitable (legal) sale condition. I am not familiar enough with mobile homes in this regard and whether there is any HCD regulations pertaining to livability etc… Should that be a concern or with the proper disclosures (and realtor handling) does it not matter?

Sometimes the simplest approach is best. If you can spend a few thousand bucks cleaning up the lot (power wash, new skirting, etc) and getting junk out of the home, making sure utilities are on and not leaking or unsafe… you may find you’ll be able to get a great tenant in there and save yourself a ton of money and headaches.

It needs to meet minimal habitability standards. Talk with your lawyer on what those are. Is someone living in the unit now? If so, does it meet those standards? I would start there. By taking the unit out of the park, you effectively lose all value of the lot. Before you do that, I would get an understanding of what the minimal habitability standards are and what your rehab costs are compared to cost to move a home out and than the headache to get a dealer to bring a home in or for you to go through the hassle of buying and selling.

If it’s going to cost you $5,000 to renovate and you can sell it and recoup your $5,000. That’s significantly easier than moving the home off the lot for $2500-$5000 (maybe more) and than going through the headache to buy, deliver, and sell a new home for $50,000+.

Do a cost benefit analysis of all your options.

if its post HUD id sell it for 1000 bucks and max out the lot rent

Thanks for the responses. The renovation does seem smart and is what we plan to explore. Appreciate the feedback.