Mobile Home Parks?

[buwatcha]

Anybody own a mobile home park?

Thoughts?

 

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[Bigguns50]

I don't own one but I lived in one several years ago for like 9 yrs. Got to know the owner.

My Sister owns a mobile home in FL where she spends time during our Winter months.

Here in MI you pay a lot rent (min about $325/mo), then of course you have to have your own mobile home (payments). In FL you buy the home and the lot and pay 'maintenance fees' to the park.

The owner of the park I lived in was always struggling and always evicting people. When you add lot rent + mobile home payment it's like a mortgage payment. He started renting /rent-to-own some of the mobile homes.

Some 'parks' are very, very nice, while most are not so nice. Poorer people live in them...here in MI anyway.

I actually have on my 'list of ideas' to find a better alternative to the mobile home park. Maybe self sustaining homes...I've researched this..there out there for pretty cheap. Again, location may play a big part as here we have big thunder storms, snow storms, freezing temps, hot/humid temps.

 

[KC Dash]

I own MHPs. In my opinion the best real estate investment available. Not very sexy but $$ makers.

 

[buwatcha]

Thx for the replies.

KC - What size parks do you own? Are they close to you or do you manage from a distance?

 

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[KC Dash]

Thx for the replies.

KC - What size parks do you own? Are they close to you or do you manage from a distance?

The smallest was 16 spaces up to a little over 100 spaces.

The closest park is 5 hours away. I have managed all the parks I have owned from a distance with an onsite manager. I think this is key for a couple of reasons. 1) You get eyes and ears in the park to be your iron fist, enforce rules, and instill pride in their community. This creates a better community and higher quality park all around. 2) Let's you choose the best park you can find with higher cap rates and returns, by not being forced to buy locally.

I visit the parks 2-4 times per year max after they are operating smoothly.

My job is to setup shop in the parks, and then manage the managers.

 

[G_Alexander]

KC,

Have you shifted your park ownership style, in regards to keeping occupancy stable, to a lease to own model? Chattel financing has all but dried up for the homeowners in the parks. Dodd-Frank placed even more stringent lending standards on originating seller-financed loans (the SAFE Act, but worse) this past month. Many of the larger-scale owners I am friends with (500+ spaces) have shifted to purchasing newer homes for their parks and facilitating lease-to-own / rental programs. Problem is that you then become a rental property manager.

Mobile home parks are still a very attractive niche to me, but the operating model has changed a bit now and looks like a hybrid of the "mobile home glory days" (parks full of home-owners, who rarely moved and required no management) and rental property ownership. It's not like this makes owning them unattractive, with proper management teams in place. Automation is still the goal.

Also, the fact that so many owners are retirement age and own their parks debt-free is very attractive. Seller financing is more readily available in the non-investment grade sized parks and more attractive to the seller than a straight cash sale since retiring owners are risk averse and can't eek out better returns in the equity markets or high-yield debt markets than they can carrying a note on a park which they trust. Also lowers their tax-liability at the time of sale and spreads their gains over a defined period.

 

[KC Dash]

KC,

Have you shifted your park ownership style, in regards to keeping occupancy stable, to a lease to own model? Chattel financing has all but dried up for the homeowners in the parks. Dodd-Frank placed even more stringent lending standards on originating seller-financed loans (the SAFE Act, but worse) this past month. Many of the larger-scale owners I am friends with (500+ spaces) have shifted to purchasing newer homes for their parks and facilitating lease-to-own / rental programs. Problem is that you then become a rental property manager.

Mobile home parks are still a very attractive niche to me, but the operating model has changed a bit now and looks like a hybrid of the "mobile home glory days" (parks full of home-owners, who rarely moved and required no management) and rental property ownership. It's not like this makes owning them unattractive, with proper management teams in place. Automation is still the goal.

Also, the fact that so many owners are retirement age and own their parks debt-free is very attractive. Seller financing is more readily available in the non-investment grade sized parks and more attractive to the seller than a straight cash sale since retiring owners are risk averse and can't eek out better returns in the equity markets or high-yield debt markets than they can carrying a note on a park which they trust. Also lowers their tax-liability at the time of sale and spreads their gains over a defined period.

I sure have. The Safe Act and Dodd Frank have thrown a monkey wrench into carrying the paper on the mobile homes for sure. The regulations put in place to "help" home buyers, have only hurt them in our industry.

I have shifted to a "rent credit" type program from a straight rent-to-own. Where the tenant gets an amount out of each home rent payment put in a "credit" to trade on any home in the park-- if they wanted too, or they can continue renting, etc, etc. The key is to allow them to use the credit on ANY other home in the park. If not, it would be tied to one home, and a "mortgage" regulated by the safe act. The other main difference here, is that it is a straight rental until the credit is used. So we have in our leases we will do all repairs over a certain $ amount. The tenants understand this and can see themselves owning the home, so we have had better results with this than a straight rental. Our end goal is always getting rid of the homes and renting the dirt.

With the used home prices going up the last couple of years, I have bought only new homes recently to pull into the parks. There are 1 or 2 manufacturers out there that are now financing new homes to the park owners, so you can get a new home in your park with less cash than you can buy a used home with right now (in a lot of markets).

The big operators I talk to are doing similar "rent credit" programs, or just straight renting for now. I have also seen some NNN lease options setups, and that might work very well. That would be similar to a strip mall owner NNN leasing to a Walgreens where they are to take care of all the repairs, etc.

The real problem is, I don't think anyone knows exactly what to do with the Safe Act. There is so much interpretation and personal opinion, and I have yet to see any case law on any of it?? I would consult an attorney and your State MHA and see what they have to say before trying any of this. Every state interprets it differently, which doesn't help as well. The only way to know that you are in the clear is to "Rent" the home- which is something I don't want to do. I am not smart enough to figure out the Safe Act and Dodd Frank on my own, so I leave that to the professionals...


We are still seeing very high demand, and a good tenant base. We have not struggled in our markets keeping occupancy up. We get rid of the homes asap, and create home owners that want to take pride in their communities, which I think helps as well.


Mom and Pop owners who own their parks debt free are awesome! If you can build a relationship with them, and educate them on why it works for both sides, you can get some great financing structures set up! This is one reason MHPs are great!

 

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[Lakeview]

@KC Dash I know this is an old thread, but I find your posts interesting. In today's market, with property in a good location, would a strategy of building new self storage in the front acreage and new mobile home park in the back be a good strategy? I was thinking you could have an employee in the MHP manage both.

Interested in pros and cons of new build investment compared to established MHP?

 

[buwatcha]

The conventional wisdom is that building a new MHP is not a good strategy. Cost of filling empty lots are high.

 

[Lakeview]

The conventional wisdom is that building a new MHP is not a good strategy. Cost of filling empty lots are high.

Agree it is not a conventional approach but it has it's advantages such as creating value in the property. Taking a piece of property and dividing it up to increase cash flow would be a different play than buying an existing MHP. I'm interested in the pros and cons with a buy, build and hold strategy. I believe there is a shortage of MHP in the area I'm considering.

The disadvantages, I would think, would be the lack of immediate cash flow. However, once it is all built out at full occupancy, it would be a larger ROI.

 

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[buwatcha]

I guess I'm saying building a new MHP has been discussed at length at Mobile Home Park University (google it) by experts in the MHP industry and they all advise against it. The numbers don't work. Buying an older class B/C MHP that is full, with lower than market rents (that you can bump immediately after purchase), on city water and sewer is what you want to find.

 

[Lakeview]

building a new MHP has been discussed at length at Mobile Home Park University

Found it, makes since....thanks!

 

[KC Dash]

Yup, what Buwatcha said. You can buy a performing, cash flowing park for the cost of new infrastructure-- as the market sits right now. So there are not very many good reasons to build. Also, not going to be fun trying to cut through the bureaucratic red tape in most cities to build a new park. Most cities hate them, and do not allow new parks.

 

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[CashFlowDepot]

You'd also have a very hard time getting zoning to build a new park.