Investing Risks In Mobile Home Parks: Episode 30

Welcome to episode 30 of The Mobile Home Park Expert! Jay and Glenn are back, this time to discuss risks when investing in MHPs. The pair also highlight an investing masterclass that Glenn is offering. “It’s an introductory course… [with] a low cost entry point to learn something more than what you see on the internet.” “It’s 7-10hours… we give you a database and underwriting templates, diligence materials,” and more.
There’s been so much traction in mobile home parks in the wake of the pandemic. If you’re looking to learn more, we can help. We’re here as a full service resource to help you navigate the MHP industry.

Common Mistakes For Newcomers In MHP

One of the first things interested parties tend to consider is the cap rate. “They get all over themselves,” says Glenn, about underwritten parks. He contends that these parks are not as appealing as they seem.
While many view high cap rates as a plus, many of these on a wholesale level are POH communities. Now, POH are usually a good thing, but only for the seasoned park owner. Newcomers will experience an overwhelming wave of new concerns and responsibilities. Truthfully, it may not be worth the trouble.

How Partners Can Help Mitigate Risks

“You want to want watch out how that mom and pop, broker, or wholesaler have things underwritten,” says Glenn. These moments call for solid advisement. Having a partner in the MHP expert affords you thorough investigation. We can determine if the cap rate is legitimate, and help in dealing with municipalities.
We can also help you determine the right zoning questions to ask. There are some considerations that many newcomers simply don’t know. “If it’s a non-conforming use, you may have some challenges down the road when you go to replace a home, or bring a new home in.” Glenn says if the home has different setback rules, it can be held to an entirely different standard. It doesn’t only impact that home, either. The entire park is put at risk.

Understanding Setbacks in MHPs

Glenn recounts a recent deal from South Carolina. It was a close to perfect situation. He says the owners were looking to enhance their park. One of the homes was a vacant, dingy relic, and they wanted it gone. But once they did some digging, they found that replacing the home would lead to big investing risks.
“Not only could they not bring the new home in… they went through a whole redo on the whole park. After $300,000 of arguing with the city,” they were forced to redevelop the park. The growing financial strain proved turbulent for the owners. Luckily, the market provided several opportunities for them to rebound. But it’s still an example of the municipalities’ influence.

Contact Us Today

For more on the subject, listen to the linked episode above! You can also watch the video on our Vimeo channel here. Do you have any questions about the mobile home park industry? We can help! Schedule a consultation with us today!

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