I know the common consensus is to not build a new park from the ground up. It’s better to buy an older one and fix it up. What is the stigma about this?
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I wouldn’t say there is a stigma about ground-up construction however it is a much tougher endeavor from start to finish. I am currently working on two large-scale (300+ unit) ground-up MH constructions and the largest issue is the willingness of banks or debt funds to get on board. Both banks and Debt Funds point to the sponsor having limited experience in MH construction as well as comparable construction projects because really nobody does ground-up construction at the moment. However, if pulled off, could prove to be very profitable.
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Banks are not the problem here (with me at the moment anyway). I have a banker just about begging me to build one. I do have decades of construction experience as well as my partner who has decades of civil construction plus all the machinery. He did the civil work on the '96 Olympics and other large stuff.
I think I will run the numbers and see what’s what. I just wondered why most park investors shied away from it. I guess coming from a construction background, I dont see the issues.
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It is very interesting to see that there is rarely any ground-up construction in MH (besides some of the major players like Sun Communities) in comparison to other asset classes. This could largely be due to municipalities refraining from zoning land as MH and the headache of chattel / absorption / infill.
What bank is willing to finance your construction?
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Citizens First. Commercial dept. The park will be outside Little Rock.
I can get you a name when my partner gets back from vacation if you like. I have never met thr banker. I have done everything remote since I live in Texas and 5 hours away. This has been our bank on 2 other parks, but there were already existing.
I am not entirely sure, but I believe that the issue may be storm water management and the cost of
The infer structure. It seems to me that most parks were built out in the woods or on a farm. They simply
Put down gravel or paved roads and started with simple wells and septic systems. The park owner could put in a few trailers at a time and before long, they had a thriving MHP. With current planning and zoning laws,
The whole development will be scrutinized by local zoning authorities and getting your entitlements is now a long and expensive process. Once you have your entitlements, the Stormwater management system is expensive to install. Most areas now require curbs and gutters, and maybe even sidewalks. Once you start the process, you are in pretty deep before you ever get your first dollar in rent. In today’s world, you have to be very well capitalized in order to get from concept to bringing in income. For the same amount of effort, a builder can build single family homes for sale and sell them for whatever the local market will support……with houses selling for several hundred thousand dollars and up. In the jurisdictions that will support a $800-$1000 per month MHP pad, the houses will likely sell for $750,000 and up. It is not only a safer bet for the developer, the local tax authorities are much more likely to support SFH’s or condos Before they’re going to support a new Mobile Home Park
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Understand about the stormwater. That won’t be an issue when I can but the pipe and have it dug in a week. It’s the one thing I can do with an in-house backhoe that doesn’t need a license. You dont necessarily need curb and gutter. You can do it often with catch basins and asphalt driveways. Just completed an 80-million-dollar project on an NCAA college that had absolutely no curb and gutter. Just simple catch basins and run-off pipes.
Not saying this will be the case here but Texas probably has more restrictions than Arkansas.
Of course, we do have that as a contingency in our contract as well as many others, like how much water/sewer connections I can get without overloading the utility companies. All I know is that I can’t get 3 phase electric. Not that I would ever need that with a land lease community. We only got under contract last Monday. Lots of diligence to do yet.
Mike1.
Nobody is building parks because it’s way cheaper to buy a run-down older park, fix it up, and fill it up than to build a new park and fill it up.
If you buy an older park it will cash flow on day 1.
If you build a park it will take several years to build. Then you have an empty park.
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I get it. I really do. But, if no one is building parks, and they are disappearing every day, then why not get in on the ground floor? (so to speak)
Does everyone just sop up the gravy until there is nothing left to get?
Doesn’t someone have to step up and replenish?
If I can build a 50 unit for 1 mil (or less) is that worth it?
To be fair, I haven’t ran the numbers as I dont know them yet. My contract is contingent on several factors. Including the number I can put on the land. I can get the base at half price as well as the asphalt. I can get the pipe at cost. I can get concrete at 80% less than most. I can get copper wire cheaper. The inspectors come to my BBQs/bonfires and have a beer. Why would I not utilize these assets? It seems to be a waste not to.
My banker loves the numbers. My mentors loves the numbers. Heck, even my SCORE guy loves the numbers.
I just dont know what I am missing. I hear all day long about how not to do it. From here and BP and other places too. But if you can rope a calf, why jump off the horse to catch him? That just causes more movement that is unnecessary. And leads to bad knees later in life.
As to your several years, I plan on building it. I have every skill needed to build it from the ground up. Less than a year. After the preliminary vetting of course.
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It sounds like it could work in your case but what do I know, I’ve never done it. My two cents would be to make sure you’re not getting tunnel vision on MHPs. Can you make 2x if you build a class A apartment complex? Self storage? Build, flip it, use the proceeds to go buy a nice existing park. Just consider if MHP is this highest and best use.
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I do like self storage too. I also agree about the tunnel vision. I’ve even tried to talk myself out of it and give them to fee. But I’ll a least run the numbers first.
Mike , I just started building a small RV Park in San Antonio, TX. Hope if you would share some of your experiences with me if you have in this area. Currently, I’m trying to get the contractors for the utilities. Thinking of doing asphalt roadways & pads instead of concrete due to cost. Initially I’ll do 40 units, next year hopefully expand to additional 80 units.
Thanks.
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Miker1,
Sounds like you have your mind made up.
Go for it. If you can build it and make money then go for it.
Frank is a lot smarter than me. One of my policies is to follow the leader.
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I’m consulting with a few guys that are trying to get one off the ground near the lake close by. The first hurdle has been water. The water dept didn’t have enough pressure but for three more meters. That’s been solved. Cost about 50k.
The next hurdle will be septic. In Texas you have to get with your local river authority. Theirs happens to be the Neches River authority. They will most likely make him use aerobic septic because I can see no other scenario available to him. His will be in 3 phases.
Unless you have city water and sewer, you need to get this ironed out before you ever worry about contractors. I’ve done a lot of work in New Braunfels area but never a park. I have a few contacts there still but it has been 10 years ago. Let me know if I can help and I’ll do my best.
I’m far from having my mind made up on this. In fact, I have been trying to talk myself out of it because I have heard it’s not a good idea. Only new park I have seen is one in the next county and it worked out great for him. That doesn’t mean it will work out great for me though.
Miker1,
Yeah, we have the city of SA water & sewer & the permits should be ready soon. If you have good supply sources -like you said - for Asphalt, plumbing and electricals & if you can help, that would be great. Thanks.
I have plumbing and electrical if you want. These are great great guys and will do you an excellent job. You can drop my name if you want. Contact me at mreynoldsjekcc@gail.com.
Sadly, I didn’t do any asphalt in that area but I do have an excellent concrete guy.
In most places zoning is stacked against new parks. We just got the variances needed to build one, but it was all but a miracle that we were able to push it through. Our timing was good, as local housing prices are now well out of reach of the average local, so the town was amenable to this addition to local housing inventory. We are looking at $80K-ish per pad to build out our 90 lots. Thanks to high local RE prices, we should be able to have all initial investment funds paid off by the time we infill 50-60%.
Financing is not an issue, the return is so great (with such little risk) that we have our pick of private investors.
I suppose the old park already has land and fence.