I hear all the time that you shouldn’t build a new park it is too risky and it takes way too long to see a return on your investment and that most likely you’ll be broke before you even finish your project.
Has anyone brave enough built a park in the last few years? What advice do you have for those that are thinking about it? Would you do it again? Do you recommend it?
Please feel free to share anything about your new MHP, I am sure there are plenty of people here like me waiting to hear / read someone’s experience in building a new community.
Getting ready to. Close on the land in a couple of weeks (70 acres). Engineering hired. Plan on buying new mobile homes in phases of 25. Source for homes and set up has been identified. Have to cut $50K worth of timber on the property in May. Eventually 225 sites.
@Doug64, thank you for your post!
My Husband and I find your posting interesting as we have both Mobile Home Parks and Timber acreage (300+ Acres) which are made up of a mixture of both Planted Pines and natural stands.
We were just curious:
1.) Was kind of Timber?
2.) Was it Planted Timber?
3.) Where are you located?
4.) Have you done a comparison of the return on Timber Land (passive investment with minimal capital outlay) versus the return on building a Mobile Home Park (less passive investment with huge capital outlay)?
Thanks in advance!
@Doug64 That’s awesome, that’s a big park and a lot of land; looks like a really nice project. I know you are super busy now with this project but if you can squeeze some time here and there it will be of great service to the community to hear about the project as it progresses. Thanks for sharing!!!
I will do that. Nothing happening over the winter, just waiting on weather dry enough to cut the timber.! Probably May.
@Doug64, thank you for your responses!
We wish you the very best!
I’m also going to begin a 14 days study course next month to get my mortgage loan originator’s license so lease/purchasing the trailers to renters won’t be an issue
Doug, looking forward to following your project! We have a farm in crowville, wondering how close we are?
Great idea about becoming a loan originator. I have been looking into mitigating my risk on lease purchase, but I think if you own the home, you are liable for injuries. It doesn’t matter how the document reads to a judge. I am wondering if there is a way to do a lease purchase the way a car rent to own dealership does.
I live 20 minutes from Crowville. Very familiar with the area.
Congratulations. I get tired of people saying, “You can’t do that anymore”. All that said, it takes far more work, far more knowledge, and far more access to soft capital but at the end you have something special and the long-term upside is fantastic.
I should know, I built nine parks in the 70s and 80s in addition to partnering up to buy existing properties.
FYI: We have a dozen clients with build from the raw ground up projects underway.
I believe with the huge unrequited demand that anyone that does this right will have a huge success.
Have you completed your market research yet? If so, what part of the market are you targeting?
If you can get a city to green light it, in a market where the lot rent to construction costs makes sense, where the achievable infill rate makes sense for your financial model, and you have access to a ton of money, then it makes sense. The money part of this equation is crucial. You need money to bring in homes and runway to handle unexpected costs.
I believe it is doable however it is my opinion that targeting the “affordable” housing market is a mistake. Low income is not worth the effort or expense of having the community owner having to carry the cost of the homes. Financially it would only make scenes if you target a more affluent client base, retires, empty nesters etc. that are able to by the homes outright or be able to finance through a bank. This eliminates a primary cost for the developer in having to finance residents homes and allows for higher lot rents.
If someone is building a community it should be in a area that can support upscale. It is a successful business plan and is, in my opinion, the future for new builds.
@doug64 it sounds like a very interesting project. Here’s my two cents:
Only improve the lots you need (probably obvious)
The occupancy will be based off improved lots not papered (again obvious)
There is excellent non-recourse government sponsored lending available (maybe not obvious)
Once you reach a value of over $1.4MM you can do a 75% LTV $1MM loan ($1MM is loan minimum)
As you continue to develop you can recap, also called supplemental financing, every year up until the last 3 years which will allow you to stay at the 75% leverage
There are multiple term structures (5,7,10,12,15,30) all are non-recourse, 30 year amortization, rates today under 5%
At the end of the term you can pull all the supplemental loans together and refinance again up to 75%
Do it all over again until you are full
Just my two cents for what it is worth
For what, the mobile homes? Wondering who originates those loans? I researched with our state rural development agency but not sure they do trailers.
They are, I believe, discussing a program for community owners that works, but takes help from an outside consultant like Ed Hicks or Rod Knoll to get through the paperwork and hurdles to make it work.
The excellent non-recourse gov’t sponsored lending I was referring to was for the land not specific to the homes. The home would have to be financed another way. I will check with my local USDA B&I guys to see if they have any options on non land home purchases. I am guessing that they do not but i love to be proved wrong in situations like this. I will make a call and let you know. the terms would not be the best but maybe I just say that because I am used to issuing non-recourse terms with multiple terms at super low rates. I am anxious to see what USDA can do on a product like that. I will keep you posted. Aubrey Matthews 801-599-1878
@Doug64 Can you give an update on this project? One big question I have is how much was the cost per pad w/o the homes?
@RishelConsultingGroup Who is Rod Knoll? And does he have a website? I know of Eddie, and have talked to him, but haven;t heard of the other.
Like you both were referring to, yes there are some good government loans that can be used to construct a new park or rehab an existing park. Here are some details below for those of you who don’t know.
First off it is the HUD FHA 207M program are for construction and rehab of parks, and they can’t be used on the homes, only the infrastructure and amenities. Also they are a pain to get, like best case scenario is 8 months from start to actual funding, and lastly it better be for a big project. The fees are pretty high, so I wouldn’t try unless you are spending over $2M because you are wasting your time and money, however the terms are pretty good. The amort is over 40 years, the interest rate is just slightly above the gov’t interest rate, and you can do a 90% LTV. During the rehab or construction period the loan is interest only although with such a long amort and high LVT it won’t save you a ton.
The last one I heard being funded(from Eddie Hicks when I talked to him) with the program was for $40M in the coast of SC if I’m not mistaken. Each had to be a doublewide, so a lot of land was needed and the all had permenant carports. I think it was something like a 500 unit park, but I am sure lot rent was pretty high. Anywho it is not for the faint of heart.
Also the USDA has a similar program that can be 90%LTV (97% LTV if you’re a non profit), 40 year amort, however it is only available for rural areas, and doesn’t go by the USDA eligibility map. It has some very tight restrictions for rural areas in this program, but certainly is an option.
Either one you are dealing with the government, so many of those employees don’t get investing or MHPs, so it can be hard to go through the process to convince them, and in some cases you go through the process and don’t get funded at all. In many cases the people who could get the loan could have private investors at their disposal, so they don’t need the programs or the headache.
Can’t give you the cost/pad as yet. I have just recently had the timber removed and now I am in line to have the mess the loggers left behind cleaned up. I have to have all of the stumps sheared and the remaining logs, branches, etc removed so that I can begin laying out the infrastructure. 6-8 weeks maybe. I’ll only have the stumps completely dug up that will be located in my proposed road.