Are you getting into the mobile home park business but unsure where to start? Mobile home parks have become a more popular choice considering purchase and rental rates. They offer greater purchase price points, stable cash flow, and good demand for affordable housing. As with any investment, there are risks, especially for first-time investors.
Avoid rushing to a purchase without understanding common risks and making a potentially costly mistake you may regret for months or years. Before you sign on the dotted line, you need to educate yourself. To get you started, consider these eight mistakes every first-time mobile home park buyer should consider and how to think about making a sound investment for your future.
1. Not Learning from the Existing Community
If you buy your first park, you can seek out the experience of established, successful operators to reduce the shoot-from-the-hip mistakes you find with first-time operators. You may spend a few days at an established community to experience how it operates. Visit the site https://www.inspirecommunities.com/fl/ to see professionally managed communities in Florida and to help you experience success in this type of property. Learning the best practices from established models, you will find the ability to refine your vision, manage your assumptions, and avoid pitfalls.
2. Overlooking Utility Responsibility and Infrastructure
Understanding the park’s utility structure is also very important. Is water, sewer, and electric service public or private? If private, you will likely be responsible for all ongoing maintenance costs and repairs. Replacing a septic tank or aging water lines can significantly limit your net profit. Also, do tenants pay their utilities, or are costs included? This can have an immediate impact on operating expenses.
3. Assuming Occupancy Equates to Rent Collected
Many first-time buyers mistakenly assume that the park’s occupancy rate equates to rent collected. Unfortunately, this is not necessarily true. While a home is on a lot, it does not guarantee rent is being paid. Always request a rent roll with deposits made into the bank and check for inconsistencies and long-term vacancies. A park with low actual collections may offer far less profitability than indicated on paper.
4. Assuming Mobile Home Parks Don’t Require Management
Mobile home parks aren’t a set-it-and-forget-it kind of investment. Although they may be considered a more passive investment than other properties, they still require solid management. Whether dealing with tenant requests, enforcing park rules, or managing utility issues, there is work to be done. First-time buyers usually don’t take into consideration the time and energy they will need to spend on management or the need for a property manager with experience. Even a great mobile home park can quickly become a headache without solid management.
5. Neglecting Due Diligence on Zoning and Compliance
More mobile home parks are not operating legally than you might think. Some will be in non-conforming use zoning, and some will have code violations that have not been resolved. Ensure the park complies with local zoning and has valid permits. Ensure there is no restriction regarding how many homes you add or replace. Local ordinances could restrict what you can do to your property, and ignoring them can lead to fines or legal action against you.
6. Overestimating the Value Based on Potential
It is easy to become enamored with the “upside” of a park that has vacant lots you could fill or homes that you could rehab. While having a park with potential is great, don’t ever use this to determine your purchase price. Lenders and institutional investors all purchase parks based on their current performance. Simply purchase the park based on what it earns today, not what you hope it will earn sometime soon.
7. Ignoring Tenant-Owned Homes vs. Park-Owned Homes
A distinction is made between tenant-owned homes (TOH) and park-owned homes (POH). With TOH, you will find less to maintain in your property management because the tenants will maintain their own homes. POH will produce higher rent, more turnover, and higher costs for repair and maintenance, plus more of your time for ownership management. Find out the percentage of TOH and POH homes in the park you are looking at.
8. Not Conducting an In-Person Site Visit
Purchasing a mobile home park without visiting the site is a big mistake. An in-person inspection uncovers necessary details you can’t see on paper—poor road maintenance, hidden drainage issues, or neglected infrastructure. Don’t just review photos or drone footage; see the site, speak to some residents, and examine the utility connections. What you experience on-site is often more revealing than what you see in the listing.
Final Thoughts
Purchasing your initial mobile home park can be an amazing experience—albeit challenging. Many of the most costly mistakes happen early when emotions are high and due diligence and investigation get rushed. But knowing what to avoid and asking the right people will assist you to nimbly circumvent this costly landmine and achieve a steady, income-producing investment that lasts for a long time.
