I am new to the forum and excited to dive into the world of mobile home park investing. I have been reading a lot about the benefits of investing in this space; like affordable housing demand and the stability of the income stream but I am still trying to wrap my head around a few things before making my first move.
What should I prioritize when evaluating potential parks: ?? I have heard terms like “cap rates,” “occupancy,” and “infrastructure,” but I would love to know what experienced investors look at first.
How important is location: ?? I know location is crucial in most real estate but is it as vital in mobile home parks, given their unique customer base: ??
Any common pitfalls to avoid as a first time buyer: ?? I am sure there are plenty of lessons learned out there and I would prefer to avoid any major mistakes if possible !!
The best thing that I did before buying my first park was to attend the MHU Bootcamp which is offered by the group that runs this forum. You’ll get all of your questions answered there and even more.
The Park has to be in a place that I want to visit. About 20 years ago, we owned a park in Adelanto, CA. The place was a $hit hole. I would show up to do a site visit, and as soon as I got there, I wanted to leave. 110° during the summer and cold during the winter. The hotel and food available were horrid.
Later, I bought a Park in North Bend, OR. It was a beautiful place. There were lots of fun activities, such as fishing and riding the dunes. There was also a movie theatre and decent hotels and restaurants. I looked forward to visiting the park, knowing I would have a “mini-vacation” while working.
It must be in a metro area with at least 100K. Nothing is worse than trying to fill a vacancy in a dying town. About ten years ago, we owned a Park in Ohio. We would spend $10k fixing up a home, doing an RTO, or Selling on payments. The folks would abandon the house and do $20k in damages. The town was slowly dying. It was one step forward and two steps backward. We lost over $2.0MM on that deal.
Singlewide to Doublewide space ratio. If the park has too many lots that will only hold a single-wide home, then that’s a problem. Lending is difficult, changing the park’s culture is difficult, etc. I do not mind single-wide homes, but it is better to install double-wide upon turnover.
SFR vs MH prices. If the locals can buy an SFR for under $250K, then good luck selling a New or used Mobile home for any profit, if at all. We have a park in ME where the SFR prices range from $350k to $3.0MM. We can quickly sell a brand new doublewide for $180K (making about $80K profit). I also have two parks in Redding, CA. We are having trouble selling homes over $50K. In the County, you can buy a house on land for $75k. I have a brand new single-wide for sale for $95K; it will probably sell for $65k, a $+30k loss. https://www.zillow.com/homedetails/12125-Lake-Blvd-53-Redding-CA-96003/402354922_zpid/s.
Utilities: Private Utilities are a lot harder to operate. I have a few parks on Well and Septic; running a park on City/City is easier. A LOT EASIER!!! If you have a park on Private Utilities, you must keep more reserves available for emergency repairs. If the well pump goes out, it could cost you $10K. If the Leach pit fails, that could cost you $20K.
This list is not in any particular order, but these are some things I consider in addition to the financials.
Attend the MHU Bootcamp and learn everything you can about this space. Evaluate deals and network with other investors. Then you will be in a position to recognize the opportunity when it’s presented.