The Truth About Mobile Home Park Due Diligence

Mobile home parks all pretty much look alike. So why do some make so much money while others not only lose money but also add on a stack of perpetual management problems? The answer is that there are fundamental differences between successful and unsuccessful mobile home parks, and you can only figure out which type of park you are looking at - a winner or a loser - through a complete property inspection, which is typically called "due diligence". Without using due diligence, you are not really investing in a mobile home park as much as you are gambling with your money.

Why due diligence is essential

Effective due diligence is all about making sure that all the assumptions you use in your initial calculations in determining the profitability of the mobile home park are true. You verify every inch of the profit and loss statement, the financial statements, the actual costs of water, sewer, power, mowing - everything. When possible, you get copies of the actual bills. Otherwise, you get three bids. You make sure that the occupancy is as promised. You verify the city permits are valid. In a nutshell, you trust none of the information you were given by the seller, and you start from scratch to verify every number and condition.

How it works

You take apart all of the parts of a mobile home park, and you verify the condition and cost to each one. If you have not done this before, you definitely need a resource to point out all the components so you don't miss one. Our favorite is 30 Days Of Mobile Home Park Due Diligence which is a guide that tells you what you need to verify each day for 30 days (the standard length of due diligence is 30 days). You can buy one of these at www.MobileHomeUniversity.com.

The traps it can save you from

People who so not perform good due diligence often buy into horrific park scenarios. I know of buyers who purchased parks with no operating permits, failing water and sewer systems, parks that are environmentally contaminated, parks that are vacant when they thought they were full, utility charges that are three times what the seller represented, etc. Each of these can render your investment useless - and you can't even try to sell it until you have fixed the problem, which can sometimes run into the hundreds of thousands of dollars to complete.

The time and money investment is not as large as you think

With the internet, you can do a tremendous amount of due diligence from the convenience and comfort of your home or office. Our favorite websites for internet due diligence are www.bestplaces.net, www.zillow.com, www.googlemaps.com, and www.rentometer.com. You can also perform a great deal of due diligence by phone by simply calling for rent comps at other parks or calling the city for permit details, or calling the Chamber of Commerce for employer data. On google map's "street view" application, you can even see the park from the street, just like you were there driving it.

Conclusion

Ben Franklin once said "diligence is the mother of good luck". This statement pretty much sums it up. Those who perform good due diligence rarely fail to produce winning mobile home park investments, while those who do not end up frequently with lemons.

Frank Rolfe Mobile Home Park Investment Expert
Frank Rolfe has been an investor in mobile home parks for almost 30 years, and has owned and operated hundreds of mobile home parks during that time. He is currently ranked, with his partner Dave Reynolds, as the 5th largest mobile home park owner in the U.S., with over 250 communities spread out over 25 states. Along the way, Frank began writing about the industry, and his books, coupled with those of his partner Dave Reynolds, evolved into a course and boot camp on mobile home park investing that has become the leader in this niche of commercial real estate.