Even though we love our rental businesses, managing properties is not a cakewalk. Certainly everyone of us knows the pain of it. But how about a rental business that is truly passive, requiring no to minimal efforts? A recession proof, high demand and constrained supply business. Would you be interested in learning about one such rental business? Investing in a mobile home park is one perfect business opportunity for Real Estate investors.
Investing in a Mobile Home Park allows you to make money from the dirt. Learn to find the right dirt and inject value in it. No need to deal with tenants and toilets anymore. The business has got a potential of returning more than 10% safe returns annually. Just align a few ducks in the row and get your mobile home park up and running.
Business Plan - Mobile Home Park Business Plan title=Amazon.com: Mobile Home Park Business Plan style=width:100%;text-align:center; onerror=this.onerror=null;this.src='https://encrypted-tbn0.gstatic.com/images?q=tbn:ANd9GcRrlUM0UcWq2BzI_pP_gd1zfaq73jJGzxLWdQKY2ZHHB2L-FM901oRr0gRFNdsg12RDjM4&usqp=CAU'; />
A Mobile Home Park, in general, is a community of manufactured homes placed on a plot of land often referred to as pads.
St544a Single Wide Mobile Home 16 X 80(76)
According to a more official definition by the code of ordinances . The mobile home park is a properly planned plot of land subdivided for the use as sleeping/living quarters, or parking spaces. The spaces must be maintained for rent or without rent. And there must be space for three or more mobile homes in order to be considered a mobile home park.
The Classification of Mobile Homes are done based on a star rating system. A star rating provides a reference on what quality of living and infrastructure can be expected. Based on the ratings, a mobile home park is classified as a
In order to be successful with mobile park investing, you must understand a few things. Go wrong and you will be ripped off.
How To Write A Business Plan In Seven Simple Steps
It is unlikely that you will get financing for a 1 star or a 2 Star mobile home park. So, it becomes important, you know the ratings before investing in one of the mobile home parks.
Suppose you have invested in a 5 Star Mobile Home Park. Do you think you will be able to cater to a large audience? The community who will live in your 5 star Park will mostly belong to the affluent ones. Their mobile homes are either a second home or a vacation home. Will such affluent individuals be your consistent tenants? Don`t you feel they will have more than enough resources to move every now and then.
You need consistent renters. Those who stay for long and don’t move every now and then. Once the mobile home is parked, the person or the family must stay there for many years to come. But how can you ensure this?
Palm Lakes Village Mobile Home Park Topo Map Az, Maricopa County (union Hills Area)
As per the Wage Analysis report, half of the US workforce earned less than $35, 000 a year which comes to roughly $2900 monthly. The average median rent in the US is about $1097 according to a data prepared in 2019. Going forward with these numbers and the 30% rule , a person with $2900 monthly income can afford a maximum $870 for housing costs plus utilities.
This represents a perfect opportunity for investors who can provide affordable housing. And in order to be affordable and yet profitable, you must target a 3 star or max a 4 star Mobile Home Park. Because anything below this will attract low quality renters and financing will also be an issue.
The first and foremost thing about the mobile home park business is to stay away from starting a park from scratch. Buy the existing ones and pump value in it. Setting up a new park from scratch is not a viable option due to
A155a Single Wide Mobile Home 14 X 70(66)
A Mobile Home Park Business can easily yield a 10% cap rate. So, if we stick to a minimum cap rate. You should find a mobile home park that at least provides a 10% cap rate and has a further potential of generating a higher rate.
In order to understand the Cap Rate for a mobile home park. You must have these numbers on hand for a quick back of the envelope calculation.
This is a low cap rate for a mobile home park deal. In order to get to 10% cap rate, you have to consider negotiating the purchase price to $283, 000.
Mobile Home Park Business Plan: A How To Guide
When you are hunting for the MHP deals, it is important to evaluate the right price. Paying more for a deal can eat up your profits and can even set you up for a negative cash flow.
The first piece of advice when evaluating a mobile home park deal is to avoid those parks that have park owned homes. The park owned homes may seem to be an asset to an average investor Joe. Rather these are liabilities.
Most of the parks that have park owned homes are old mobile homes from the 70s or 80s and those were certainly not built to last. Betting on these falling apart structures may take up your fortune to get them to rent ready condition. Hunt for deals where there are no park owned homes.
How To Buy A Mobile Home Park With $36k
Not to worry. You can still invest in that MHP with park owned homes. The key here is not to overpay for a mobile home park. Simply, do not take in account the value of POH and neither any income from these homes when evaluating a deal. And if you have to account for its value for some reason, only bet half of the value that you can get by selling the mobile home in the market.
“A Wise MHP investor will never own the mobile home, but only the land. The idea is to make money from dirt.”
Like any other real estate, buying a mobile home park at the right location is very important. The major criteria in choosing the location is that your mobile home park should appeal to the right audience.
Mobile Home Park Business Plan Template [updated 2023]
A location where the median income is less than $50, 000 will be a perfect state for you to invest in your motor home park. Refer to this table depicting the median US Household incomes by the state. More than $50, 000 median income households can afford renting a regular home.
As per the design standards , the compliance goes that no more than 4 mobile homes per acre in a mobile park where public water and septic tank is used. And no more than 10 mobile homes per acre where public water and sewer is used. Though you must check the regulations first with the local authority of that state.
Further, it is important to ensure you are getting enough lot rent for the price that you paid for that one lot. Some locations are expensive compared to others due to high land prices. Before investing, refer to the Lot Rent throughout the US and compare the deal accordingly.
Plans For New Burger King Move Forward; Zoning Variances Approved
Also, stay within county limits where there are all sorts of daily essential stores nearby your mobile home park. Avoid buying a MHP at far away remote locations and locations which are in the hurricane, flood or in environmental hazard zones.
One of the most expensive mistakes a mobile home investor can make is by not checking the infrastructure of the park properly. You don’t own the mobile homes but still are responsible for maintaining the infrastructure of the park. Roads, water and sewerage are among the few responsibilities of a MHP owner.
Expect to lose about tens and thousands of dollars if you get to repair any of these. So, it is better you perform all the due diligence within time to avoid such pricey unexpected costs. Furthermore, always stay away from those MHP that have private utilities and extra amenities. Maintaining the private utilities like wastewater systems or drinking water plants is not at all an affordable job and will significantly increase your Cap Ex.
Northstate To Redevelop Mobile Home Park On Lake Norman
Financing a Mobile Home Park often seems to be the hardest part for investors. On the contrary, it is not. It’s just different. Lenders do recognize this asset class and the potential of MHPs to generate positive cash flow. There are many lenders who specialize in financing this asset class.
However, we are sticking towards only purchasing an existing MHP. The benefit, your lender can run through the existing financials increasing your chance to secure financing faster.
When buying an existing MHP, it is important that you take all the previous financial reports and tax returns of the previous owner. This way you can both analyse the profitability and secure financing.
Resident & Business Advisory July 2020
Shop around and see which lender offers you the best rate and terms. Lenders have specific requirements for originating loans for mobile home parks. Every lender has a different requirement.
Lenders specialize in mobile home park financing offer loans up to 80% LTV, fixed interest rates from 5-30 years and for credit scores as low as 670.
Why not invest in a mobile home park when you can get a stable cash flow, potential of higher returns and that too with minimum botheration? Do you know any other real estate asset class which is this stable and likely to be always in demand?
Strategies For A Best Case Scenario Mobile Home Park Takeover
During economic meltdowns or recessions, many tenants have to leave their pricey apartments and search for
0 comments
Post a Comment