Table of Content
But there was never someone there to steer us in the right direction. Join our mailing list and receive a free book titled "Mobile Home Park Investing". Understand other income streams (i.e. laundromat, RV income, late fees). Understand the infrastructure of the park, including electrical limitations.
Our favorite is30 Days Of Mobile Home Park Due Diligencewhich is a guide that tells you what you need to verify each day for 30 days . Below is a video from Steve Edel speaking at the 2018 TMHA Conference on how to perform mobile home park due diligence. As mentioned earlier, one of the benefits of owning a mobile home park is renting out the land, rather than the homes.
DEALS & UPDATES
This time period is usually between 30 and 60 days. In conducting your due diligence you are looking to identify anything that poses a potential issue and that you are able to change or fix. These usually deal with the cleanliness of the park (junk & trash piled up), mismanagement, lack of rule enforcement, collections, expenses that can be reduced. Thirty days of diligence is an industry standard, but there is no rule that the due diligence period must be exactly thirty days. Of course, the longer the diligence period, the better it will be for you, the buyer.
Watching them flying over the lake was a breathtaking spectacle. Also, find out what other parks restrictions may be for the age and types of homes. It may be that your park will fill the niche of having only newer homes or the older homes.
Commercial Real Estate Investing Due Diligence Checklist: Mobile Home Park
The real key is to make sure to complete all the steps in a complete and timely fashion. I didn’t think it was necessary to hire a third party to inspect the park. I did however traveled to the park and spent a couple of days in town talking with the seller, the park manager, a couple of residents, a residential real estate agent, bank representatives, etc. Another good source of information would be the local mobile home dealers.
If you are responsible for the gas meters and lines then you may want to have the system pressure tested as a small gas leak can cause your service to be shut down until it is located and repaired. It is also a good idea to have this done on a routine basis to avoid potential problems. Review any park inspection reports conducted by the State Board of Health or other City/County inspectors.
Mobile Home Park Due Diligence Checklist!
In this park lot rent was $300 per month, but it included water, sewer and garbage. As I investigated the water bills, it became evident the current owner was spending way too much money on water. In fact, I was able to determine that there were two or three water leaks that needed immediate attention.
However, I must note that it didn’t feel right to ask the residents to pay an additional $50 or so to cover their water bill. Instead I lowered the lot rent from $300 to $255 when I transferred the water bill responsibility to the residents. The seller and park manager investigated my concerns and were able to locate and fix the water leaks. One good thing is that all the leaks were easy fixes.
We can perform offsite, onsite, or end-to-end diligence service!
On google map's "street view" application, you can even see the park from the street, just like you were there driving it. You take apart all of the parts of a mobile home park, and you verify the condition and cost to each one. If you have not done this before, you definitely need a resource to point out all the components so you don't miss one.
This decision to test the demand for housing by buying, moving, and adding a home to the park, during the due diligence period, was one of the best decisions I made. Not only was I able to prove to myself that there was sufficient housing demand, I was also able to test the entire process of adding homes to the park. To better understand demand, I did several searches for rentals and for houses for sale.
It occurred to me that one way to address my concern was to bring a home into the park to see if I could rent it or sell it, while still in the diligence period. If I could not rent or sell the home, then I would back out of the deal. On the other hand, if I was successful at renting or selling the home, then this would validate my plan.
When you put a mobile home park under contract, you should have a stipulation in the contract that will allow you to confirm what the seller has said and to evaluate the overall feasibility of the purchase. Due diligence should involve looking at the physical, economic, demographic and market feasibility of the project. This time period should usually take between 30 and 60 days. People who so not perform good due diligence often buy into horrific park scenarios. Each of these can render your investment useless - and you can't even try to sell it until you have fixed the problem, which can sometimes run into the hundreds of thousands of dollars to complete. Utilities, especially water, can be one of the largest expenses in a park.
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