Understanding Mobile Home Park Property Taxes

Values of mobile home parks have been skyrocketing over the past decade. At the same time, so have municipal government deficits. Where these two lines intersect is with property tax, and that’s why this is an important item for all park owners and buyers to understand. So how can you take control of your property tax costs?

Apply appropriate amounts to “goodwill” at purchase

Talk to your CPA, but in many transactions there is the potential to allocate part of the price to “goodwill” which will reduce the amount paid for the real property, which is what drives the tax assessor’s valuation. There may be other advantages of this strategy as long as it is done at an appropriate level and with the careful supervision of your tax professional.

Don’tbe afraid to appeal if the valuation is too high

We once purchased a mobile home park at a foreclosure sale for significantly less than the assessed value. Whenever the value is clearly too high (which can happen in certain circumstances) don’t be afraid to officially file to overturn the amount and get it assessed at the fair value. Some park owners think that somehow this leads to further problems, but it really only leads to a tax reduction in most cases. The tax assessor’s role is a process and you need to exert your rights when the property is not being valued correctly.

But don’t push the issue if it is reasonable

That being said it’s foolish to poke a sleeping dog if your value is actually in-line with reality. Some mobile home park owners try to “game the system” and complain about values that are clearly still too low. This can blow up in your face, as the tax assessor may, after careful review, even raise your assessed value higher if it’s warranted. Pick your battles wisely and don’t view every notice of assessed value as an opportunity to make a fake claim that it’s too high.

Take advantage of informal tax reduction options

As an alternative to a formal protest, in some markets you can have a casual meeting with the tax assessor’s office to see if you can get more minor reductions without having a formal inquiry. Many tax assessors actually promote this concept as it keeps the number of formal proceedings at a minimum. In these meetings you make your case for why the park is overvalued and see if you can get a reduction (best tool: bring with you a bunch of photos of the worst looking homes and street scenes in the property). While you normally will come away with some concession in value, it’s normally not going to be gigantic (but every little bit helps).

Budget accurate amounts at purchase

One of the most important strategies concerning property tax is to make sure you have budgeted accordingly at purchase. If the mobile home park is currently assessed at $750,000 and you’re paying $3 million, it’s unlikely that the value is not going to be going up. While many assessors will not push the envelope and try to go to full value as they don’t know exactly what that is (as long as you’re in a “non-disclosure” state) and don’t want to invite a fight with you, they definitely will typically increase the value upon the purchase because they sense that’s appropriate.

Hire a professional if needed

There are companies that can appeal your assessed value for you if you feel uncomfortable doing it yourself. These groups typically get paid on performance, taking a portion of your savings as their fee. Many park owners have used this service and been successful with it. Of course, if you go it alone then the amount of savings you make is 100% yours to keep, but it’s all about winning and some owners need the extra professional help.

Conclusion

They say there are two things you can’t avoid: death and taxes. But the truth is that you can make great strides on both if you make sensible choices and do great diligence on the options.

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 around 20,000 lots 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.