MHP--? concerning park-owned homes

Hey everyone-- so glad to find this forum :slight_smile: I’m sure this question has come up before… sorry if this is a major repeat (and if it’s a dumb question in general :slight_smile:

We’re looking at a local park that appears well-priced for the current cashflow but has several issues that make it difficult to structure a proper offer.

**About half the homes are park owned and rented out with 100% occupancy at excellent rates for the area. This drives the cashflow up-- way up.

**Lot rents are low-- on average $60-70/month less than others in the area. So— if rent from the park-owned homes is factored out and only lot rent is considered, there’s no way the bank will finance anywhere near the asking price

**Also, we like to sell the homes with owner financing, but— if the bank factors in the homes when structuring the loan, won’t we be unable to sell them until the loan is paid off?

**Property taxes for this park are sky high already (this is TX-- argh :slight_smile: If the park sells at almost double its current valuation (confirmed on the county website) won’t the taxes also double? If so, that alone would make the park much less desirable cashflow-wise. How do you handle something like this during negotiations?


In response to your post…I don’t work for a bank so I can’t speak on their behalf but I do a ton of loans for parks with park owned homes. Usually they are structured where the rent from the park owned homes can be used towards the borrowers DTI. The lender I usually use will take the lot rent from parks in the area to qualify for debt service ratios.

If you are thinking about buying a park with many park owned homes you will usually have to write a separate contract with the seller for what he wants for the homes and finance it through him. The lender will only lend on pads and land not the homes. Usually the seller is willing to cooperate in doing a separate contract.

You can certainly do lease options for the tenants after the loan closes. Only if the homes are permanently affixed and taxed as real property and this is in limited cases will they be included in the loan and can’t be sold until the loan closes. Otherwise the homes have nothing to do with the lender or the loan. You can sell them on any terms you would like.

Hope this helps you!


Hi Lisa,

Thanks so much for taking the time to answer-- big help~!

That’s what I was thinking-- seperate contract for the mobile homes. However this seller is adamently refusing to even consider a second.

In this case, basically the cashflow might support a higher asking price, but the actual land value (based on lot rent)/ home value (based on the value of 20+ year old mobile homes) does not… makes it very hard to determine a fair offer without a huge infusion of cash, especially when the seller’s negotiable on price but not on financing :frowning:

Guess I’ll just make an offer we can live with and see what happens-- maybe if they want to sell bad enough, they’ll reconsider.

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finding a true value where park Owned homes are involved. Don’t ever buy a Park using total rents, home and lot rent, as similiar values.

Maintenance, management, taxes, utilities, insurance, turnover, bookeeping,legal costs will be much higher the more PO homes the Park has.

Search this site for some help using the search button above…key word maybe park valuation? Here are a few of my favs:

I believe Steve Case and Ernest Tew developed a great “thumbnail” approach called the 60/30 rule.

I think it was Rick Ewens that postulated using wholesale price to bring in a similiar home and adjust for condition. I use 10X the rental amount OF THE HOUSE. Fro example a $500 rental ($300 home, $200 lot rent) mobile will have $3,000 value for me in DD unless it was new(er). This is my value when buying…I’m sure I will use a different vauation when selling these “manufactured mansions” LOL

I look for Parks like this with lots of PO homes in them…financing is very difficult and I have found some real deals out there.

I would never buy a Park without help with DD. There are several folks on this site that do this VERY well and I will gladly give you names off board. There are ways to minimize property tax issues at point of sale. A Master Lease or a Lease with Option would help. Maybe an LT…

Greg Meade

352.216.2020 Cell

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Thanks Greg-- fantastic information and links :slight_smile:

Using the 60/30 rule, it appears this park is priced at about double (which is pretty close to our conclusion, fwiw :slight_smile:

Still haven’t decided if we’ll make an offer, but I’d like to construct one just for the practice if nothing else. If this one doesn’t work out, who knows what’s around the corner ?

Thanks everyone~


I would like to know what is the down side of starting from ground up on a mobile home park?

This has been discussed many times here, but I will just give you a few reasons off the top of my head. The biggest downside is money, specifically return on your investment. You will spend vast sums of money and wait a very long time to see any return. Where will you find all this money? You will need very, very deep pockets. If you think about it, you are building a development except with mobile homes. So you have all the problems of a developer and none of the advantages like good financing. You will also have a lot more trouble filling the park. A developer just builds houses & a realtor finds buyers. If things get tight he can just sell lots. How will you get mh into your park & how long will it take? And the meter (interest) is running while all this is happening.

Another problem is government. Most do not like mhp & would rather see anything else like houses or apartments. Even in the country where I live you would need a full development plan, survey & an asphalt road. Have you checked the price of gravel & asphalt lately? It cost me $3k just to survey 65 acres of flat farmland. Think about all those lots & roads. Then we get into utilities: water lines & electric lines at a minimum. When you finish all this, what do you have? An empty mhp & no rents coming in. To even begin to make sense, you would need to do a mobile home development, where residents own the lots. Even then, you had better look at your numbers very carefully.

These are just a few of the reasons why you would do well to avoid new mhp development.