Essential Checklist of Mobile Home Park Investment Best Practices
An estimated 20 million Americans live in mobile homes, representing nearly 10% of the nation’s housing market. The figure is likely to rise this year as more people are pushed out of the traditional housing sector due to tighter lending rules and an improving image of mobile homes.
With higher returns, greater risk spread, and lower maintenance: it can easily be said that Mobile Home Parks (MHPs) are one of CRE industry’s most viable investments. However, as with any other sector, exercising due diligence is critical so that you don’t get ripped off with a bad deal. Before you invest, take note of this essential checklist of mobile home parks best practices:
1. Past Financial Statements
A park deal providing a decent amount of rent may look good until you factor in the various miscellaneous costs of running it. When judging a deal, always ask the current owner to provide you with at least one full year of past bank statements, all contracts, and signed leases as well as information on utilities and insurance charges.
2. Disclosure of Any Recent Issues Regarding Infrastructure
Ask the seller to disclose any recent problems with the park’s infrastructure and if any repairs or additional expenditure may be required.
Of course, since the incentive is to sell, the current owner may not disclose all of the issues for fear of losing a prospect or weakening their bargaining position. Be sure to privately ask the tenants as well regarding any of such problems for good measure.
3. Maps of the Park and Lot Sizes
If possible, ask for maps of the park and lot sizes. This will grant you a more accurate picture of the number of tenants the park could effectively hold without getting overcrowded.
4. Vacancy Rate
If the park has a higher than average vacancy rate for its location that it is a clear indicator that the property is not renting well. It can usually give us a clue of some underlying problem preventing tenants from renting or staying at the park for long.
5. Repair and Maintenance Records
Acquire from the current owner records of every repair and maintenance done in the past few years. This will help grant you a better understanding of the level of upkeep the park requires or if the current owner has been neglectful with their property.
6. Past History of Lawsuits
Acquire from the owner about any history of legal action taken against them. It could be because of trouble with regulatory compliances, failure to disclose a property defect, or providing misleading information. Their history will provide a better view of exactly the type of seller you are dealing with.
No matter if you are new to real estate investing or already established, MHP investments provide one of the lowest risks and barriers to entry. With the demand increasing and the market unsaturated, early movers are primed for big gains.
Leave a comment below if you have any insights or questions! Contact us at Virgil Brooks Investment Real Estate with any of your MHP investment needs.
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