Tenants all pay cash

What are your thoughts on purchasing a park in which all tenants pay in cash (probably most have no bank account) and the seller (inherited park) has terrible books to confirm the income?

Sounds like an opportunity to increase the value of the park. Just do your due diligence and be comfortable that the revenue is indeed there. If you get uneasy, back out.

The revenue part of the due diligence is the challenge. The owner says the books won’t make any sense. Since its all cash, he answered affirmative that the previous owners may not have deposited all the cash payments. Of course I think the tax returns would reflect the bank deposits. Get permission in DD to create a rent roll and personally ask every tenant have they paid the rent on time for the past year? Of course they will all say yes, as I stated most probably don’t have bank accounts and are Hispanic. In that regard, because they don’t want trouble they probably do pay, but to verify? Any ideas other than what’s stated?

The tax returns aren’t going to show the revenue. Your owner is likely cheating on his taxes and that’s fairly common with smaller parks.

If you buy the park, convert to no cash, some tenants will conform and stick, some you will have to evict. Is the market there to replace those tenants? I wouldn’t trust anything the seller shows you except number of homes physically present. Who owns those? After that, I would say it doesn’t matter what the previous owner did (w.r.t. cash collections).

Brandon, the homes are present and all tenant owned. I suppose for even those without bank accounts they could use their cash and buy money orders to pay.

Right NC. That was my point about verifying the revenue being difficult; the tax returns would reflect the bank deposits which probably aren’t reflective of the true revenue.

Make sure you get an esstopal letter for each tenant to verify rent, water and any other fees or considerations.

You may, as part of your dd (and put this in your pch agreement), have the owner convert to check/money order for the next collection and future collections. Use this as a guide to knowing the collection rate.

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There is a balancing act between doing an extreme amount of diligence on an all cash business - getting estoppel letters, determining collection rates, etc versus just using the tax statement as your business valuation. Sellers of smaller Parks especially hate high levels of rigor and 23 page MHP-specific contracts irrespective of their bad books. The conversation is, “if you want this increased price then there is an increased diligence needed on my side,” or “I can make you a fair offer based on your sworn records with the federal government and do less intrusive diligence.”

Who is going to finance this thing?

I have suggested to the seller, " You are aware that no bank or lending institution is going to finance this without good books. And I find it hard to believe someone is going to pay cash without being able to verify and feel comfortable with the revenue." He seemed to absorb that. That’s when I suggested that his easiest route to sell it would be through seller financing, and I would be interested in buying it under those circumstances. I explained how this could produce a nice income stream for he and his 3 siblings with no responsibilities. He said he was going to talk to his siblings about it. Hopefully, that’s who is going to finance it. Otherwise, if they won’t go for that, I would have to get a large discount and pay cash.

But I definitely agree with you about the balancing act. The reason they want to sell is because none of them want anything to do with it, including a lot of contractual/DD/management changes to get it ready for a sale. As my grandfather used to say, “They just want to get a shed of it.”

I am facing a similar situation in a park I am looking at. The present owner has never claimed about 50% of the income, which is fine by me but financing may be a problem as he says he is not in a position to hold the mortgage. I will need to change his mind since it seems he has no other buyers.


Does he have books that at least represent the 50% he claimed? What’s your comfort level on the income he can’t verify?


It’s not uncommon to come across parks where all of the tenants pay cash. It’s just a fact of life when doing business in our space with a seller like the one you have. What seems to matter most in these situations is your mix between tenant owned and park owned. You have massive leverage over the tenant owned. No pay, No stay when you take over really works and you rarely lose these people regardless of their payment history with the previous landlord. On the park owned, this can be all over the map. Based on what you’ve said, I am willing to wager that you will probably be ok here.

When you take over, adopt a no cash policy. No exceptions. It’s not hard and people almost always comply without an issue. If someone can’t adapt then just purge them out of the park. FYI, out of the 800+ lots we own, no one’s ever left because getting a money order was too much of a problem for them.

If your seller pushes back against holding the paper; take what they give you in your first request for documents, send it to at least three financial institutions, cc him on all correspondence, and have the bank cc their responses back to you to him as well. Hopefully, they’ll bombard you with requests he knows he can’t fulfill. He’ll realize very quickly that financing isn’t possible because his books aren’t up to par. Then, give him an out by financing you for just enough time to create all of the financial requirements a bank will need (4-5yrs).

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Thanks for the input, historical data of converting to MO results, and the recommendations.

Does he have books that at least represent the 50% he claimed? What’s your comfort level on the income he can’t verify?

Yes he has financials I can verify, the income he has not claimed I am not comfortable with and will only offer a price based on the verifiable income. He will not be happy but it is a start point that gives me the power to negotiate. Other interested parties are afraid of the risk but rather than make an offer they simply walk away. For most it is too small of a deal to invest from a distance but for me it is only 15 min. down the road past my Community.


Sounds like you may have some negotiating leverage. I hope you get a great deal.