It’s Hard to Screw Up Buying a Mobile Home Park if You Follow These Three Rules By Frank Rolfe

I’ve been buying and running mobile home parks for 30 years and I’ve had plenty of lessons learned in the process. From my first park Glenhaven – which was as tough a turn-around as you could ever find – to some much nicer properties that only needed better management to flourish, I have carefully noted what worked and didn’t work. And here are the three main rules I learned from that science of observation and testing. If you follow these three rules, it’s really hard to screw up buying a mobile home park.

Rule #1: The Necessity of Due Diligence 

Benjamin Franklin once said that “diligence is the mother of good luck” and he’s 100% correct. I’ve never seen a mobile home park buyer do poorly who exercised good due diligence habits. That includes all the pain-in-the-neck aspects like getting market comps and verifying certificates of zoning. I’ve found that virtually every park owner who has ever failed decided to skip necessary diligence steps, or rely on seller information without verification. You can never safely buy a mobile home park without following the science of diligence. I feel so strongly on this topic that my partner Dave Reynolds and I wrote an entire book about it called “30 Days of Diligence”. I think the main reason that I have bought hundreds of parks without a single major failure is because I am the eternal pessimist and I believe the only way I can avoid disaster is with good due diligence. 

Rule #2: Liquidity Is Key 

The late Sam Zell was a firm believer – or evenly zealous advocate – of liquidity, which he defined as being the innate ability of a property to be sold or financed at the drop of a hat. He got the nickname “the Gravedancer” because he had the ability to get out of real estate sectors (most notably office buildings) quickly before the rest of the herd figured it out. To be truly liquid, a mobile home park needs the following attributes Alignment with lenders. Bankers want properties that have few park-owned homes, stabilized occupancy, solid infrastructure and strong market dynamics. If you want to be able to get a loan – in both good times and bad – you want to be aligned with what lenders want.

Refuse to be “undercapitalized”. Budget properly and don’t get involved in deals you really can’t afford when you factor in capital expenditures or other risks (like a failed packaging plant). If you need a financial partner, get one. Don’t just hope that bad things won’t happen as they always will. 

Only buy properties that are desirable enough to attract plenty of buyers when you want to sell. Buyers want properties that make money with little risk. Provide that.

Rule #3: Don’t Lower Your Standards 

Here’s where I see many problems start. A buyer can’t immediately find a deal that meets their criteria so they decide to lower their standards and accept a park acquisition that is contrary to what they know to be a smart move. You see this particularly with 1031 buyers who are running out of time and go ahead and elect to buy things that they know are probably a bad idea. Most mobile home park buyers are only trying to buy one park or maybe a couple. They need to display patience and not lower their standards just to get something purchased. If you find yourself tempted to do so, you need to focus on your volume of deals considered as a low volume will make you more likely to try to push things rather than let them grow naturally. If you hit all the industry brokers, on-line listings and do a strategic campaign of cold-calling and direct mail, you should find plenty of options and it will give you greater confidence to stick with your original minimum standards.

Conclusion 

Mobile home park assets are amazingly reliable to produce cash flow and to whether every economic storm. Most deals that go bad are the direct result of the buyer making mistakes and getting lazy. All the raw material is there in any deal to be properly examined and sorted on the front end. You have to really work at it screw up buying mobile home parks. Follow these three rules and you are virtually assured of making money with your mobile home park investment.

Frank Rolfe has been a manufactured home community owner for almost three decades, and currently ranks as part of one of the ten largest community owners in the United States, with more than 16,000 lots in 20 states in the Great Plains and Midwest. His books and courses on community acquisitions and management are the top-selling ones in the industry. To learn more about Frank’s views on the manufactured home community industry visit www.MobileHomeUniversity.com