Podcast Episode #7: The Most Common Mistakes MHP Investors Make

 

 

 

Being new to any business means you’re going to make a few mistakes. There’s a learning curve, but while you’re learning, you’re also in the business. The same is true for mobile home park (MHP) investing and ownership. The MHP business isn’t like anything else, so you don’t want to go into it blind. MHP expert, Glenn Esterson, shares the most common mistakes MHP investors, including himself, have made.

  1. Not vetting tenants during the due diligence period. This should really be the first step to evaluating a deal. Assume the current owner hasn’t done a thorough job vetting their tenants and approach it like you’re starting from scratch.
  2. Not fully understanding the impact of your relationship with the municipality. You won’t always get a warm reception from the municipality as a MHP owner, but you need to approach them while you’re considering a MHP investment. You want to check on permits and make sure the park isn’t in violation in any way. Also ask about future plans in case they’ll impact the park in a negative way.
  3. Lacking an understanding of the local market and its economic and demographic drivers. If the city’s demographic is shrinking for any reason, you need to know in advance. It will impact your exit if you buy. Likewise, if a bad area is on the uptick, you need to know. It should affect whether you purchase a park and give you insight to future prospects.
  4. Falling for cheap value-ads and biting off more than you can chew. Deals like this are tough, for anybody, and can end up not giving you the returns you anticipated. It’s situations like these where you really need to think about the value vs headache. How much frustration will this deal cause, and is it worth the value I might get when I sell?
  5. Not fully understanding or carefully inspecting park infrastructure. Often overlooked, you need to make sure the park’s infrastructure is working right and is up to code. This includes water and sewer if you’re tapped into city lines or the condition of the septic system if you’re not.
  6. Buying at the wrong time. So many variables go into it being the right time to buy a park, and they’re all conditional of where the park is, what condition it’s in and more. The best thing to do is consult an expert.
  7. Walking into financing with unrealistic expectations. Banks don’t really like to loan to MHP owners. They may never say yes to outright financing, but may work with you when it comes to refinancing. Don’t get disappointed if a bank says no, and have a plan for alternate financing options.

Learn more about how to address these common mistakes before you make them with the MHP Expert Podcast, hosted by Glenn Esterson and Jason Sirotin. Check it out today before you make your first move as a potential MHP owner.

 

Podcast Transcript

Jason Sirotin: Hello, welcome to the Mobile Home Expert podcast. I’m Jason Sirotin here with Glenn Esterson. Today we are going to talk about the top seven mistakes every new mobile home park investor makes. Glenn, seeing how you’ve seen all sides, and you see a lot of deals why is this important? Why should people know about the things we’re going to talk about today?

Glenn Esterson: Well, I pretty much made all of them when I bought the park and found myself in some boiling water during the recession. I’ve seen it over and over again with the tons of new guys that I help go through this thing. A lot of them get to me a little too late in the process. Some of them get there just in time and we’re able to help. So I thought it would be relevant at this point to have a discussion about some of the more common mistakes made by, I wouldn’t say all people, but by many of the guys getting into the industry because as it’s said you don’t know what you don’t know.

If no one’s telling you what to do, and there’s not a lot of literature on this particular subject, you might find yourself saying, hey, well, I thought I did a great job with my due diligence, and I thought I understood what the tenants were like. I thought I understood what banking was like with this industry, but you find yourself on the short end of that decision. It can, in some cases, jeopardize you significantly. It definitely did for me.

Jason Sirotin: That makes total sense, man. For me, being a newbie and trying to learn all this when we went over the topics it just really hit me as like, “Oh, man, I need to think about these things more.” So let’s get started. These are in no particular order, but let’s talk about the first mistake that every new mobile home park investor makes, and that is not vetting tenants during due diligence.

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