I need advice

I’m in Texas and I have recently ran across a piece of land (14 acres) that I want to develop into a mobile home park. I have been talking with the city inspectors, engineers, surveyors, road contractors etc… trying to get my mind around the total cost involved. It looks like I will be able to do the park in six phases (more economical for me) and my numbers are working out to really nice returns. My plan is to rent the lots and owner finance the trailers at 12% where each trailer is older then 12 years and refurbished. Anyway, I was talking to the city engineer today and he said a mobile home park hasn’t been done in the area in many many years and I asked why is that. He said that for the most part mobile parks are not viewed as appreciating assets. After he said that my bubble kind of busted, but every time I go back and rework the numbers they make a lot of sense. What do you think? Do parks appreciate with time?


If you do decide to develop this property, I hope you will consider doing a blog. Your experience would be fascinating for many of us. I am buying a park in TX right now and I keep having the same thoughts about developing a park in phases from scratch.


The property is worth 70,000 and the first phase or first 20 lots will cost an additional 120,000. My problem is that I only have about 70,000 in cash. Is it possible for me to pay cash for the land and then get with a bank and use the land as collatoral for the 120,000 dollar loan and work it like I was building a home with a construction loan.

Does anyone know how this is done or if banks will do this?

Hi Jacob,

I think there was a miscommunication with the city engineer. Mobile homes are not appreciating assets. They are depreciating assets and considered personal property which makes them unavailable as acceptable real estate collateral. You can compare a personal property loan with any other consumer loan such as car, boat, etc. loan. Rates are typically much higher as one day the asset will become 100% useless and the collateral ends up being worth nothing(Lenders view the asset this way). This is where a depreciation schedule makes sense.

For a property this is how it works. Land is the appreciating asset. Real improvements are also considered in the equation of total real estate value as land and real improvements are, by definition, inseparable. The real improvements are the things that depreciate and deteriorate. This is why for an apartment complex you have a depreciation schedule worked out that considers the deterioration of materials over time. On the flip side though, land doesn’t really get any less valuable by being less useful tomorrow than it was yesterday (Please bare with me and lets stay away from the hypothetical contradiction scenarios… Environmental hazards, ocean or river fronts, etc.). For the most part land will only ever appreciate. The simple equation of supply and demand explains this clearly enough. There is never more land owned yesterday than there is today, which suggests that the supply was never more today than it was yesterday. This never ending direction, of having less and less supply matched with more and more demand, doesn’t require rocket science to make a connection in the relation to price.

Buildings can appreciate… Typically it is determined by supply and demand again. e.g. I want to buy a newly constructed home (stick built single family) for the reasonable price of $180,000 ($100,000 land, $80,000 construction). One month later the cost of materials to build a house rises by 50%! The cut for the developer and all other workers would typically stay the same in building a house at this time unless a situation was produced where their base costs were increased as well as the material costs (say by gasoline prices). So now my building is all of a sudden worth more! Lets say material costs were originally $25,000. It now costs $37,500. Gas went up so the other construction costs increased by $1,000. This scenario suggests that my house appreciated by $13,500 in one month. This is purely theoretical and situations like I’ve described never happen as a matter of course. Building, land, location, personal preference, supply and demand, etc. are all factors to be recognized as affecting fair market value. FMV is quite simply what a willing buyer will pay to a willing seller.

There are a lot of human factors to consider in realizing value. We won’t go into too much detail here as we can’t objectively discuss it as well. This is especially true in specific sub-markets such as Gold Beach in OR this last year. Based purely on human factors instead of solid real estate practice, the prices of real estate soared much higher than it should have. This was a simple matter of supply and demand, however the demand was considered (from a good practice standpoint) unreasonable in terms of what one should expect in return for what they are paying.

The point… Personal property is expected to depreciate just like you would expect on an apartment complex (Obviously the time involved and extent of deterioration becomes much greater on an apartment compared with a mobile home). The main difference in a mobile home from an apartment building (when we are not considering land into the equation) is that a mobile home costs less to make and lasts a shorter period of time. This is why it would be difficult to take out a 30 year loan on a mobile home. If you had a fully amortizing payment, the length of the loan would need to be at least as long as the life of the collateral. e.g. Equipment loans are usually on short amortizations such as 3-10 years. The idea being that the loan balance should never exceed the collateral value.

Mobile home park appreciation… The change in value of a mobile home park can sometimes be anticipated in the following way… Rates were at their lowest in history a few years back. It became very cheap to buy your own house! It didn’t make sense to rent an apartment for $800 when you could buy a house with that same payment of $800. And so, the multifamily market suffered a bit as a result. As occupancies dropped rents were typically lowered to compensate and bring in new tenants. When one park lowers their rent, it only follows that there are new market numbers to consider. And so when rates began to rise, we say multifamily start to pick back up. As occupancies increased, the rents could be increased to follow the market. Supply became more valuable as demand increased. Here in Medford OR we have reached a market vacancy of less than 3% three months ago! This is pretty amazing considering the town’s population is at ~85,000 and with over 200 complexes.

There are a million ways a mobile home park can appreciate in value. The most obvious way is by increasing its revenue. I felt these other topics are less touched on and so I’ll leave the capitalization approach to value out of here.

In any case, I hope I answered some part of your question.



When I did my loan, for my MHP expansion, (6 lots, and 1 19 unit mini storage building) I bought the land outright, and then went to the bank. They did an appraisal on the whole project as if it would be completed. And loaned me I think it was 70% of the total. They gave me cash just like with a construction loan. Actually it went pretty well. Hope this helps

I see a differents between the traditional mobile home park and a manufactured home park where homes are placed on perminate foundations. It is my understanding that a manufactured home on a perminate foundation does appraisate.

Any comments?

In my experience foundations aren’t the only factor to consider. I think this site has a pretty solid explanation that covers many scenarios.

My posts mainly pertain to a lenders perspective regarding mobiles in a park where they are not considered part of real estate, but instead personal property.

You can buy a mobile for $5,000 and then turn around and sell it for $6,000. I’d say there are two ways to look at this.

  1. The mobile appreciated according to the definition of fair market value: What someone is willing to pay for it becomes its value.

  2. The mobile was sold for less than it was worth originally and $6,000 was the true value being realized. This suggests that the original sale was outside the scope of what we consider “normal,” in a fair market transaction.

It is my experience that a lender will almost never be able to recover the loan balance of a mobile home under default when it is not tied to land (depending on your state’s DMV laws… Usually a mobile must be retitled at the local DMV to be considered part of the land and no longer considered chattel.).

If you had a park where all units were without a vehicle title(if it were even possible with the zoning or conforming restrictions on mobile home parks. I guess this would be a good time for a title or zoning expert to step in and clarify some general laws regarding possibilities for how mobile home parks can legally be operated…), I guess you might be in good shape for appreciation but good luck on the financing!

Great posts everybody!

Post Edited (01-19-07 08:06)

bring in 20 units from scratch seems really low. i had a small Park in Galveston County Texas and 11 years ago it cost me almost 10K to bring lots online. Wells. purification system, septics, electric infrastructure, pedestals, water lines. gravel roads, engineering, soil density, perk, permits, grading, concrete runners, survey, legal,labor.

And this was 11 years ago when concrete was 40 per yard delivered.

how confident are you of your numbers? I fig same park, same county, today at least 15K per pad.

good Luck.

Greg Meade