Are you a newcomer that’s unclear about what kind of properties you should be looking for? You’re not alone! There are several variations in the mobile home park industry to choose from. Each has their own unique traits, and a distressed mobile home park is no different.
It’s important to keep in mind that very few of the parks in our industry qualify as distressed. Also, these kinds of parks may very well prove counterproductive based on your aims. It’s good to walk into every deal with a complete understanding of all moving parts. This will save you from pursuing deals that you may ultimately regret. That said, here’s a closer look at the topic at hand!
What is a distressed park?
Distressed can mean several things when referring to a mobile home park. It could refer to financial distress. These can come from collections. This could be due largely to the implications of COVID. And, if it was poorly managed pre-pandemic, it’s almost guaranteed issues compounded afterwards.
Then there’s structural distress. Some parks suffer from deferred maintenance issues. Failed septic systems, poor roads, leaks everywhere, significant home repairs, and more. When deferred too long, combined with high operating expenses, the bills become exponential. All these add to distress from a revenue standpoint.
Distress in banking
From the banking side, think of a buyer that has a loan that’s almost due. Maybe their one of few people in industry that’s over-leveraged. They may not have enough cash to refinance. Or they might have overpaid for the park. Pair this with poor management and low revenues, and the outlook is bleak. This means that either he’ll lose the park to the bank, or he’ll have to pay it out of pocket. All of these are signs of distress.
You can use online services to find parks that are 30-60-90 days behind on mortgage payments. This isn’t the most effective way though. That’s because these account for such a small percentage of parks. In fact, we wouldn’t be surprised if you didn’t find any. You can also use resources like Auction.com to find distressed items for sale.
You can use google earth with parlay overlay. Look for parks from an aerial view, then zoom in to see if the roads, homes, roofs, etc., look bad. If the whole park looks bad, you’ve likely found distress. From there, click the parlay link, and search tax records through the county links.
You can always seek the help of a local realtor or broker. They may have good boots on the ground and can give good insight on parks in distress. They focus on area vs product type. Also, specialist like us at the MHP expert can uncover distressed listings. Reach out to us today for all your MHP needs!
Why this may not be the best option for you
Ultimately, you have to consider why you’d want to buy a bad park. Even if a property is distressed, many owners are not likely to come down on their prices. In fact, most distressed properties are still being sold at aggressive rates. Often, the cost of purchasing and addressing the maintenance makes it not worthwhile. Even with a discount, the time headache value model may not be as rewarding as something that’s more turn-key. These properties allow you to raise rents to be more profitable and worthwhile.