Mobile home parks are reserved for veteran investors with deep pockets…
Literally, ANYONE can invest in mobile home parks (and we’ll show you how to buy them if you lack your own personal money).
There’s no “upsell” course here, or any type of coaching — we’ll give you a complete guide to buying mobile home parks for your portfolio.
We’re a Direct Mail company that specializes in helping investors find deals off-market using our handwritten mail.
Here’s the direct mail piece our clients use to purchase mobile home parks (click the image to read more about it):
TL;DR of Buying Mobile Home Parks
Mobile home parks have been on the radar of savvy investors for quite some time, and for a good reason. They offer the allure of stable cash flow and, in some cases, better returns than traditional real estate. But before you dive headfirst into this investment niche, let’s break it down in a nutshell.
1. Go with a Pro or Go Solo:
There are two main roads you can travel when looking to buy a mobile home park. You could team up with a licensed commercial agent who can guide you, share market insights, and bring potential deals to your table. The advantage here is their expertise and their ability to potentially accelerate your search. But remember, they’ll have their commission, which might add to your initial costs. The alternative? Going directly to the seller. This route might save you those agent fees, but it requires a lot more legwork and perhaps some tenacity.
2. It’s Not Your Average Home Loan:
Buying a mobile home park is a commercial endeavor, and the world of commercial loans differs quite a bit from the residential realm. Expect larger down payments (often 20-30% of the purchase price), shorter loan terms, and possibly higher interest rates. But the perk? Commercial lenders often look more at the property’s potential profitability than your personal creditworthiness.
3. The Art of Negotiation:
In real estate, especially in niche markets like mobile home parks, creativity can be a game-changer. Sellers are sometimes open to creative financing terms, especially if the property has been on the market for a while or they’re motivated for other reasons. Consider seller financing or even “subject-to” strategies where you take over the existing mortgage under certain conditions.
4. The Power of Private Lenders:
Traditional banks aren’t the only game in town. There’s a whole world of private lenders out there, individuals or entities eager to invest their money for a better return than they’d get in, say, a savings account. By bringing in a private lender, you might find more flexibility in terms and even the possibility of lower down payments.
5. Syndicate and Collaborate:
Maybe you’ve heard the saying, “Teamwork makes the dream work”? It’s especially true in real estate. If a mobile home park is out of your reach financially, consider syndication. This is where you team up with other investors to pool resources and buy a property. Each investor gets a slice of the pie proportional to their contribution, spreading both the risks and rewards.
See our Case Study on a client who grabs a 16-pad mobile home park:
Why You Should Buy Mobile Home Parks
When you invest in mobile home parks, you’re buying a unique piece of real estate. Imagine this: you own the land, not the trailers. So, unlike traditional property ownership, you’re not drowning in home maintenance woes.
Instead, your focus is on maintaining the lot.
And the cherry on top?
Every month, residents pay you for the privilege of parking their homes on your land, ensuring a steady stream of income. Of course, if you’re ever intrigued by the idea of owning trailers, there’s an option for that too (hint: Lonnie deals), but the beauty lies in the simplicity of just managing the land.
The mailer that landed a hotel (and can do the same with mobile home parks)
Here’s a client that lands commercial properties with our handwritten mailers.
Here’s what he did:
- Created a list of all the commercial properties he wanted
- Sent our mailers every month until he landed one (it didn’t take long)
What Do Mobile Home Parks Yield?
Dive deep into the world of real estate investing, and you’ll soon find that the term ‘yield’ echoes in most conversations. For mobile home parks, yield, or your return on investment (ROI), is an exciting proposition. Here’s a primer to help you understand the numbers game behind mobile home parks.
The yield you get from a mobile home park is, quite simply, a cocktail of different factors:
1. The Capitalization Rate (Cap Rate): At its heart, the cap rate gives you an idea of the return you can expect on an investment property based on its income. If you’re looking at an area with a cap rate of 6%, it means you can anticipate a 6% annual return on your investment, assuming you buy the property in cash.
2. Value Addition: One of the exciting parts of mobile home park investing is the potential to add value. Maybe there’s room to add more lots, or perhaps the current management hasn’t optimized rents. By making improvements or simply bettering the management, you can increase the rental income, which directly impacts your ROI.
3. Loan Costs: Your yield is also influenced by your financing arrangement. Remember, the lesser you pay in interest, the higher your potential ROI.
Let’s paint a clearer picture with an example:
Imagine a mobile home park in an area with a cap rate of 6%. The asking price is $1 million. But here’s the sweet deal – the seller agrees to carry 80% of the loan. This means you’re only putting down $200,000 of your own money, with the seller financing the remaining $800,000.
Let’s assume the mobile home park’s net operating income (NOI) is $60,000 annually (which is 6% of $1 million). Now, if the seller is carrying $800,000 of the loan, and let’s say at a 5% interest rate, you’d be paying $40,000 annually in interest.
Subtract this from your NOI, and you’re left with $20,000, which is the income you’d pocket every year.
Now, remember, you only invested $200,000 of your own money. So, your ROI or yield on your cash investment would be $20,000 divided by $200,000, which is 10%.
However, let’s add another layer. Suppose you increased rents or made other improvements that added another $10,000 to your NOI. Your new NOI would be $70,000, leaving you with $30,000 after accounting for the loan interest. This would bump up your ROI to 15%.
But if you were able to further reduce your operational costs, optimize the park better, or found ways to increase the value even more, getting a 20% return on your cash investment isn’t a stretch of the imagination.
Alright, let’s dive into the nitty-gritty of funding a mobile home park.
How to Buy Mobile Home Parks — The Funding
Often, the lofty price tag on mobile home parks, which can soar past a cool million, makes it a pipe dream to think about buying one with just pocket change. So, to bridge the gap between aspiration and reality, investors lean into various funding strategies.
Here’s a snapshot:
– Seller Carry Back: Think of this as a seller-financed deal. Instead of heading to the bank, the buyer borrows directly from the seller. This often means a more flexible repayment plan, and maybe even a better interest rate. The seller retains a security interest in the property until the loan’s repaid in full.
– Commercial Loan: Sure, this is the path well-trodden, but it’s not without its challenges. Commercial loans often come with higher interest rates and stricter eligibility criteria. But on the bright side, if you’ve got a solid credit history and a convincing business plan, this might be your golden ticket.
– Private Lender or Partners: There’s always someone with deep pockets looking for a promising investment. These individuals can provide the capital you need. In exchange, they’re expecting you, the expert, to manage the property. The allure for them? A hands-off investment that still yields returns.
– Syndication: Picture this as pooling resources. Multiple investors come together, each chipping in a portion of the capital required. Typically, there’s a lead investor who manages the property and, in return, gets a more significant slice of the pie. It’s teamwork at its financial best.
Securing funding for a mobile home park is more of an art than science. But with the right strategy and a sprinkle of persistence, your dream of owning one might just be a few handshakes away. Ready to dive in?
How to Buy Mobile Home Parks — Finding the Deal
Discovering that elusive mobile home park deal is a lot like embarking on a treasure hunt. The route you choose depends on your strategy, your contacts, and sometimes, a sprinkle of luck. So, where do you start looking?
1. Off-Market (Direct to Seller):
Going direct to the seller, sans middlemen, has its charm. It often means less competition and potentially better deal terms. How? Well, some savvy investors use strategies like direct mail (like the kind we specialize in!) to reach potential sellers before they even consider listing their property.
2. Online Platforms: Welcome to the age of digital real estate. Numerous online platforms cater specifically to commercial listings, including mobile home parks. It’s like window-shopping for properties from the comfort of your couch. Just type in your criteria, and voila!
3. Using a Commercial Agent: Think of these agents as your treasure map holders. Experienced in the industry, they’ve got contacts, insights, and a knack for snuffing out deals that might never hit the public listings. It’s about leveraging their network and expertise to land that perfect park.
4. Wholesalers: Sometimes (but not often), you’ll come across a wholesaler (virtual wholesalers even) who are selling a contract for a mobile home park. These come rarely but it happens.
5. Network: If you hang around enough real estate investors and commercial agents you’ll have a deal fall on your lap.
In the vast world of real estate, there’s no one-size-fits-all. But with these strategies in your arsenal, you’re well-equipped to find that gem of a deal. Ready to dive deeper into each approach? Stay tuned!
Finding Mobile Home Parks Off Market
Ah, the allure of the off-market deal! In the sprawling world of real estate, where everyone’s vying for that next great find, the off-market strategy feels like having a secret handshake. But how do you actually go about it?
Enter direct mail.
Think of direct mail as your personal messenger. Instead of casting a wide net over countless properties, you’re reaching out with a tailored message, right into the mailbox of a mobile home park owner. Given that there’s a limited number of these parks, every mail piece you send can have a significant impact.
Using direct mail effectively requires a bit of homework. Start by zeroing in on your target. Craft a list of potential mobile home parks you’re interested in. This can be based on location, size, or any criteria that aligns with your investment goals. Once you’ve got that list, it’s time to pen a compelling message. Remember, it’s not just about expressing interest; it’s about making the park owner see the potential benefits of selling to you.
Lucky for you, we’re a Direct Mail company that has perfected this craft. With our handwritten mail strategy, we’ve been helping investors find those elusive off-market deals. And the best part? Since there aren’t a ton of mobile home parks out there, it doesn’t take much to start seeing results.
To sum it up, direct mail can be your golden ticket to off-market mobile home park deals. Crafted right, it can unlock doors you didn’t even know existed.