5 Most Common Mistakes New MHP Investors Make
As with any CRE investment, there is a learning curve involved when dealing in the MHP sector. When you are just starting out on a journey, you are bound to make a few mistakes along the way, unless, of course, you have already learned from other’s experiences. Consulting the experts, here we share with you 5 common mistakes new MHP investors tend to make:
1. Unrealistic Financing Expectations
Many new investors go to the bank believing that acquiring a loan for an MHP would be just as easy as that of a more conventional property. The reality is that, as with a niche market, banks are reluctant to provide finance for something that it does not have much information on.
Then there is also the stigma attached with MHPs of being associated with poverty and deprivation that may make some creditors biased in their lending decisions. Do not expect lenders to jump at the opportunity to finance MHP investments.
Fortunately, MHPs on average cost nearly 10 times less than their traditional housing counterparts of the same size. There is generally less need for seeking out external financing when purchasing MHPs.
2. Not Vetting the Tenants
When you are new, it can be easy to forget the most important factor in evaluating a park deal – its existing tenants.
It can only take a single bad tenant to completely ruin an otherwise peaceful and thriving park community. Critically assess each and every park tenant to ensure there are no bad apples in the mix, and if they are, find out what sort of action may need to be taken.
3. Buying Too Much Property
As with any asset, just because you have enough money to buy a property doesn’t mean that you should. Cost is not a one-off affair; utility bills, insurance, taxes, repair, and other miscellaneous expenditures are all something you need to take into account when buying an MHP.
Before buying, have a realistic understanding of whether you can afford its maintenance, especially in a worst-case scenario of having a far less than optimal occupancy rate.
4. Not Checking in with the Local Municipal Authority
Always consider getting in touch with the locale’s municipality when considering an MHP investment. You need to know in advance that the park isn’t in violation of any existing policy as well as about any future developments that may be detrimental to the park.
By doing so you will also be able to access any public record of previous involvement of law enforcement in the MHP itself. This can be critical information when considering a specific MHP.
5. Buying at the Wrong Time
There are numerous factors that may influence the price of a property. If you buy it while the price is inflated (well above its intrinsic value,) you are unlikely to get good returns on your investment. When you're new, always consult a trusted real estate agent or broker to become better aware of the existing market trends.
Buying at the right time can completely transform the returns you seek from your MHP investment.
The 5 most common mistakes new MHP investors make are easily avoidable by putting in the work to know your prospective investment by consulting experts like Virgil Brooks Investment Real Estate.
By avoiding these common pitfalls, you will be taking great strides towards a successful MHP investment.
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