Perception: The Tool That Makes Great Mobile Home Park Deals Possible

2 + 2 = 4, right? Theoretically, yes. But what if the seller is convinced that 2 + 2 = 3. In the real world of making deals, …

3 0
3 0

2 + 2 = 4, right? Theoretically, yes. But what if the seller is convinced that 2 + 2 = 3. In the real world of making deals, much of the battle is the perception of the deal by the seller, not the reality. And this lack of reality is what has created some of the greatest mobile home park deals of all time. And that’s what makes mobile home park investing the highest yielding of any real estate niche.

Lack of seller education

While there are books on just about every form of real estate at the local bookstore, there is nothing on how to price your mobile home park. In addition, there is no community college or high school course on the subject. Due to this complete void of information, most sellers foray into choosing a price based on nothing more than a whim and a guess.

Lack of professional guidance

To compound the problem, most real estate brokers, attorneys and accountants have no idea how to value them either. This support network for most other real estate sectors is a dismal failure with mobile home parks. So not only does the seller not have a clue, neither does anyone else they depend on for advice. Now, of course, this can go both ways. We’ve seen parks worth $400,000 valued at $1 million, but we’ve also seen the reverse about as often. This complete absence of education pays big dividends for the buyer in many cases.

Beauty is only skin deep – and so is ugliness

Many sellers get the wrong impression of what drives a real estate deal. It’s the numbers. But they, instead, get too obsessed on the property condition which, although important, is not what really powers an income property. Tall grass and unpainted trailers don’t have a big financial impact as long as the rent is being paid. So many of the factors that make the seller perceive that their property is not worth much are easily fixed and not that big to begin with. We once bought a mobile home park at a fire sale price because the grass was 4’ tall and the trees were horribly overgrown – all of which were fixed in the span of a month.

Not all problems cost the same to fix

You can fix mowing, painting, skirting, trees – and 1001 other items – at little cost. However, replacing the water lines, or replacing the packaging plant or lift station, or replacing the roads can cost hundreds of thousands of dollars. Most sellers do not recognize this fact. They will sell from a position of weakness on a $3,000 issue as they do on a $300,000 issue. It all goes back to the lack of education on the industry issue.

Some fixes take days, some years, and some are impossible

Not only do all renovations not cost the same, but they also don’t take the same amount of time to complete. If you can get the park up and running in 30 days, that’s much more profitable than a year. However, be advised that there are some problems that can’t be fixed, such as a poor location or lack of available city water and sewer. Don’t let the seller’s lack of education rub off on you – sometimes the seller under estimates the cost and timing to fix the problem, and you can’t go along with that.

Conclusion

We have made a fortune in mobile home parks primarily as a result of sellers not pricing their parks appropriately, or understanding the cost and timing of needed repairs. We can find this price anomaly only in the mobile home park sector of real estate. Apartment owners, office building owners, retail owners – they are all too sophisticated. Mobile home parks are the niche that offers real opportunity.

Share This:

In this article

Join the Conversation