How to Buy a Mobile Home Park

Discover how to buy a mobile home park in the following detailed case study. You’ll learn how a brand new investor, Gilda, bought a distressed park and is turning it into a high performance money making machine by applying a 4 phase plan that will grow her mobile home park into an asset worth 5 times the original purchase price!

 

2 Rules of Buying Mobile Home Parks

1. Persistence: You need to be persistent when you buy a park. You will have challenges and you will have to overcome some obstacles. As you’ll learn, Gilda ran into her fair share of issues in her quest to buy her first mobile home park. She persevered until she reached her goal and that’s what you’ll need to do too.
2. Vision: The best parks to buy are the ones that are not polished and shining when you first see them. Also referred to as “distressed“, manufactured communities that need improvements provide the best opportunities but they require that you have the ability to ability to envision what the park can be with your creative touch. If you lack vision and can only see what the mobile home park looks like when you first see it, you’ll only buy the fully optimized parks and those have the least opportunity for profit.
 

Meet Mobile Home Park Buyer Gilda

Gilda is a single mother of four, beautiful, adopted children. As a licensed residential real estate agent by profession, she has some flexibility over her schedule but she learned that being an agent produces inconsistent income. In her quest to establish a steady stream of income and identify the perfect real estate investment, she discovered that mobile home park investing could generate the highest returns, especially as housing affordability became more and more difficult for more and more people. However, even with plenty of housing experience, she knew nothing about buying a mobile home park and she knew she needed a mentor. After much research, she concluded that Peter Harris and Commercial Property Advisors was the ideal coaching team to help her reach her goals.

 

Buying a Mobile Home Park Case Study

 

Part 1: The Property

The property was an 8 unit, two acre mobile home park that had tremendous upside potential with the right vision. The pads were positioned haphazardly and left most of the acreage unused but by reorganizing, the property could accommodate 16 more pads and still be within the county regulations. It was located ten minutes from a town that had three small colleges and there was a military base nearby so there was tremendous demand for affordable housing in the area. With much help from her mentoring team and after plenty of negotiations with the Seller, Gilda signed a contract to purchase the property for $240,000.

Part 2: Financing the Purchase

Gilda had to obtain financing in order to buy the $240,000 property. This park was distressed so traditional banks would not lend on it and also, the Seller would not agree to creative financing. Further, she didn’t have the funds to make the improvements. Therefore, Gilda obtained a 12 month hard money loan with a 19% down payment, which also included the money for upgrading the property and adding new pads. Also, in further negotiating with the seller, she was able to get another $15,000 cash back at closing to pay for some repairs that showed up in the inspection.

Part 3: Exit Strategy

One of the 3 No-Nos of Owning Mobile Home Parks is not having an exit strategy and so Gilda established a very clear and concise plan once she became the owner. She outlined an approach that would start by stabilizing the property, then making some improvements, adding some pads, following by a cash out refinance within 12 months into a government agency manufactured housing community loan. Then, she would add even more homes until the park value could reach $1.5MM!

 

Gilda’s 4 Phase Park Improvement Plan

 

Phase 1: Stabilize

Stabilize the Property: When Gilda purchased the property none of the tenants had leases, so she will need to implement a lease policy for each tenant.
Approval for Expansion Plans: Gilda met with the city to discuss the expansion plans and get approval for them. She has hired a civil engineer to lay out the grounds for the expansion and plans are underway.
Grading/water and sewer installation: Before more mobile homes can be put on the vacant lots, they will need to grade the two acres to get it ready for water and sewer insulation.
Budget/Financing: $35,000 which was built into her hard money loan, and she also negotiated $15,000 cash credit at closing on her deal.
Timeline: 3 months
Income: $37,800 with the eight existing tenants

Phase 2: Add 6 Pads and Homes

Add 6 new mobile homes: Gilda intends to purchase mobile homes for the new units directly from the manufacturer at 10% down. Once those homes are in the park and occupied by tenants, Gilda will make the payments to the manufacturer with the income generated.
Budget/Financing: The entire project is going to cost her $270,000. Gilda has a construction loan set up that will allow her to pay for each home as each home is completed.
Timeline: It will take about four months to complete this phase.
Value-Add Income: With the eight original homes plus the six new pads/homes, the income per year will be $95,400.

Phase 3: Cash Out Refinance

Refinance the 12 Month Hard Money Loan: She has one year to refinance and get out of her hard money loan, so now that she has increased her cashflow in phase 2, she will refinance and pull out additional money to fund the phase 3.
Replace original units: Gilda will replace the eight original mobile homes with new ones.
Value-Add income: Now with 14 new mobile home units, her income increases $142,800.

Phase 4: Add 8 More Pads and Homes

Add 8 more pads and homes: With additional site work, she can fit another 8 new pads and homes.
Value-Add income: $224,400.
Total Timeline: Two to three years of hard work to complete all the phases.
 

Added Value Mobile Home Park

• The completion of phase 4 will bring the income of the mobile home park to $224,400
• Subtract 35% for operating expenses, which leaves an NOI of $145,860
• Divide the NOI by the current 10% market cap rate
• New property value is $1.5 million!

Get a Mentor to Buy a Mobile Home Park

Gilda discovered that buying a mobile home park was far more complicated than she ever imagined. Her advice to anyone looking to buy a park is to get a mentor and this is what she had to say about working with us:
“This program has been so helpful, so spot on, informative, inspiring. Your team is fantastic to work with and even some of the other proteges. When you are listening to other student’s transactions, you find out the solutions because in this business, nothing is the same. It really lets you know it’s real. There’s so much going on out there these days. You don’t know real from not, so it’s just breathtaking to listen to real people do real things. And it’s not so out of reach. If I can do it, you can do it. We all can do it. And just imagine if all of us are doing it, how much better off we’re all going to be in the long run.”
Get the best mobile home park buying mentor right here: Mobile Home Park Investor Mentor