Table of Content
They usually know about most of the parks and can give you information on the parks reputation, whether they have in the past and will in the future refer the park to potential residents, etc. You might also find out if they have trade-ins or other reasonably priced homes for sale. With the actual sewer lines themselves, the biggest problem tends to come from the old clay tile and thin-walled plastic pipes installed many years ago. These types of sewer lines can collapse and develop clogs because of the intrusion of tree roots. You may be able to have a camera check out the pipes and you could have them professionally blown out with high-speed water jets as periodic maintenance. You will find in the due diligence process that there is no perfect park.
Municipalities play a large role in the mobile home park industry. Having a solid knowledge of the areas procedures can come in handy. They have the power to show lenience, as well as swing the hammer. This can mean consistent violation citations, possible tax hikes, city connections, and more. If you’re looking to own a park, you’ll want to build a good relationship with the municipality.
Mobile Home Park Due Diligence
Another potential electric issue is that most of the homes now require 100 to 200 amp service. Many of the older mobile home parks have 30 to 50 amps service. This will usually require an upgrade, which will typically cost $500 to $800 for parts and labor.
Other areas of the due diligence may discover smaller problems that you should be able to change with proper management and operations and can lead to quick equity increases. If one is not available ask the owner to draw one to the best of his knowledge and locate any cleanouts, shutoffs, etc. This is important to have in case of line breaks and other emergencies in the future. If possible, you will want to visit the park at various times of the day, morning, noon, after dark as you will be able to see the park as it is. It is also advisable to see the park during the week and on the weekends. This will give you a better indication of parking, occupancy, lighting, as well as noise level.
Real Estate Investing Due Diligence Checklist: Mobile Home Park
It occurred to me that one way to address my concern was to bring a home into the park to see if I could rent it or sell it, while still in the diligence period. If I could not rent or sell the home, then I would back out of the deal. On the other hand, if I was successful at renting or selling the home, then this would validate my plan.
In other areas, due diligence may discover smaller problems that you could change with proper management and operations—these can lead to quick equity increases. If this is your first park or you are looking for a second opinion we offer consultation on deal review and due diligence. This manual is designed to give you a roadmap, from start to finish, in achieving a successful due diligence examination of a mobile home park. Ben Franklin once said "diligence is the mother of good luck". 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. And here is a video from Kevin Bupp on the biggest due diligence pitfalls when purchasing a mobile home park.
DEALS & UPDATES
You want to be sure you are buying what you think you are buying. Are some of your mobile homes over the property line. Are there fences or sheds over the property lines. With a new owner, the adjoining land owners may use this time to enforce some of these issues. Check the legal description with the survey and with your contract and warranty deed. With electric service, you will want to check whether the electric is above ground or below ground.
However, I must note that it didn’t feel right to ask the residents to pay an additional $50 or so to cover their water bill. Instead I lowered the lot rent from $300 to $255 when I transferred the water bill responsibility to the residents. The seller and park manager investigated my concerns and were able to locate and fix the water leaks. One good thing is that all the leaks were easy fixes.
Most of the time your renters will just have to carry flood insurance and your lender will require the same for your buildings and utility connections. In conducting your due diligence, you are looking to identify anything about the mobile home park that poses a potential issue that you are able to change or fix. These issues usually deal with the cleanliness of the mobile home park, mismanagement, lack of rule enforcement, collections, expenses that can be reduced, etc. We started this business as investors, then owners, then... Discovered the biggest short-coming of this industry - the need for a hassle free, fast diligence process.
In conducting your due diligence you may call on experts in surveying, accounting, marketing, financing, plumbing, electrical, and legal. A final note on electric is to check whether the electric is billed directly to the residents, which is preferable, or whether the park is on one master meter and submeters the electric to the residents. In conducting your due diligence, you may call on experts in surveying, accounting, marketing, financing, plumbing, electrical and legal fields. Since the failure of any one step of due diligence might result in your decision not to buy the park, we have organized the order of steps in such a manner as to minimize expense and effort.
I’ll touch on this strategy in the original article titled How to Buy A Mobile Home Park. While there’s usually always a diverse crowd, it’s still good to get a read on these. They can mean the difference between loan approval odds, successful resale, and more. Altmuehlsee is according to me the most beautiful lake in the area. I visited it in winter so I can't say what is a service quality.
You will want to check that the park is operating in compliance with the license. If a park has 50 units but is licensed for only 25, you may have potential problems. The license may be issued by the State, County, or Local authorities. Often it is issued with the State Board of Health. Some cities have laws that state that if a certain percentage of the homes in a park that has "grandfathered" zoning are destroyed, then those lots will not be allowed to be rented again.
If you have not completed your diligence in the required amount of time, say thirty days, it is sometimes possible to get the seller to give you an extension of time. If that is the case, the best way to get the extension is to meet with the seller and show him all of the work you have performed, so that he knows that your request is legitimate. When you propose such an extension to the seller, he is normally concerned that you are just wasting his time, and that you have no intention of buying it, or that you lack the money. It's your job to convince him that you can close, and will close, if he just gives you a few more days to complete your diligence.
In this park lot rent was $300 per month, but it included water, sewer and garbage. As I investigated the water bills, it became evident the current owner was spending way too much money on water. In fact, I was able to determine that there were two or three water leaks that needed immediate attention.
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