If you’ve ever been to a “farmers’ market” you know that it offers superior selection and pricing to what you can get at the supermarket. And the mobile home park industry is like a giant “farmers’ market” in the way it’s structured and the opportunities that exist if you simply take advantage of the opportunity to shop there.
Buying direct from source
When you buy vegetables at the “farmers’ market” you have the opportunity to get items that are fresh and not shopworn and converse directly with the farmer, who often provides insight into what he’s grown. There is no middleman to take a fee and restrict the information flow (which frequently happens when you use a broker). Because you are dealing one-on-one with the actual farmer, many great opportunities present themselves in real time, and you are able to get exactly what you want. The same is true with mobile home parks.
Low pricing
Have you ever gone to a “farmers’ market” with $20 cash and come out with everything you wanted and $10 left over? Mobile home parks – bought direct from the original mom & pop owner – offer some of the most outrageously low pricing in all of commercial real estate. How low is it? Cap rates that are often twice those of apartment buildings, and properties that sometimes appraise for 50% more than you are under contract to buy them for. My first mobile home park was $400,000 with $10,000 down – and that bought you 83 lots in Dallas, Texas on Interstate 35. My second deal was $65,000 with only $5,000 down and that bought me 15 mobile home lots and a stick-built house. You never see things like that in other real estate sectors.
Raw material that you can make into something much more valuable
Of course, you go to the “farmers’ market” to buy the raw ingredients used to make pasta sauce or casseroles. The intent is to make something more important from your purchases when you get home. And the same is true of mobile home parks, in which mom and pop owners hand over properties to you that can be substantially improved with greater occupancy, higher rents and cost cutting. That’s where the profit in mobile home parks originates: from taking the property that is 70% at its potential and then finishing the job with higher occupancy, rents and lower costs. You achieve this by rehabbing vacant homes and selling them, buying used or new homes to fill vacant lots, raising lot rents to market levels and fixing such expense items as water leaks and renegotiating trash contracts and other obligations.
Sellers that are very negotiable
At the “farmers’ market” the pricing is always negotiable – they often don’t even have prices written on their products! If you ask them how much the tomatoes are and they say “$2 per pound” and you say “would you take $1?” they will answer “OK, how about $1.50” and the deal is done. Nothing is firm and nothing is off the table. Mobile home parks are identical in that mom and pop sellers are always flexible on their pricing and even are open to carrying the financing. Case in point, we have done no less than 12 “zero-down” deals over the years, in which the sellers carried the financing at 100% of the sales price. Why are mom and pop sellers so reasonable in their expectations and so willing to help you buy the mobile home park? Because they are older and care about finding their property a good home with an enthusiastic buyer. They also “bond” with buyers and want them to be success.
Conclusion
If you prefer “farmers’ markets” to supermarkets, then you will certainly appreciate the opportunities available in mobile home park investing. The potential is enormous if you know what you’re doing. And to learn the best way to identify, evaluate, negotiate, perform due diligence on, renegotiate, finance, tur-around and operate mobile home parks you should consider attending our next Boot Camp or reading our Home Study Course.