Table of Content
- Financial Bridge Substructure
- The Truth About Mobile Home Park Due Diligence
- Other Due Diligence Items
- Want to see Example Reports? ~ Call us or submit a contact form to request a demo.
- One thought on “Real Estate Investing Due Diligence Checklist: Mobile Home Park”
- We have covered it all in this manual.
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.
You never want to sign a contract with specific performance in it for the buyer. The seller, on the other hand, should almost always face specific performance if he fails to consummate the sale to you. Due Diligence will look at the physical, economic, demographic and market feasibility of the project.
Financial Bridge Substructure
So you’ve decided you want to buy a park, but it isn’t under contract yet. Congrats on taking your first step towards joining the mobile home park industry. It can be a tough road to navigate, but with the proper support and preparation, you will succeed! The more thorough you are in the due diligence phase, the better you will understand the property as well as the potential problems that may occur specific to the property. In addition, you will be much more comfortable taking over the property and most likely have plumbers, electricians, and other contractors on board to aid you in the future.
If you follow all of the guidelines in this manual, you should be able to perform a satisfactory due diligence examination. Research other mobile home parks, RV parks and apartment complexes in the area. While visiting, I took lots of pictures of the park and the park’s surroundings. I was also able to look inside a few of the park owned homes and meet a few of the residents. Most of the park owned homes were over 30 years old but were nice and clean inside.
The Truth About Mobile Home Park Due Diligence
Diligence periods in excess of sixty days are pretty unheard of, except in cases of extreme lack of park stability, such as not having any books, rent roll, etc. For example, it would not be unusual to ask more than 60 days to sort out bank foreclosure. However, except in that type of difficult environment, you will probably do some degree of damage to your reputation by asking for more than sixty days of diligence. This website has a detail mobile home park due diligence checklist. There are many other websites like this out there. You’ll need to decide what items are relevant to you and what to ignore.
Watching them flying over the lake was a breathtaking spectacle. Also, find out what other parks restrictions may be for the age and types of homes. It may be that your park will fill the niche of having only newer homes or the older homes.
Other Due Diligence Items
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.
Want to see Example Reports? ~ Call us or submit a contact form to request a demo.
Mobile Home Park Due Diligence – Expense AnalysisHowever, I was also interested in transferring the water bill to the tenants. This would require installing meters under each home to bill each tenant according to their actual use. Doing this would eventually cause tenants to reduce waste and eliminate leaks because now they would be responsible for the water bill. The seller had made it a bit of a habit to add a small mud room to each home he owned. This is a very nice feature and I thought it would be good to continue to do that. I found a mobile home for sale for $5,000 and found a trucker that would take care of moving the home for $3,000.
When looking at a park make sure you check into anything that does not seem right. Are there easements that don't make sense, are there oil wells on the property, etc. You can review bills from the utility companies from the same month over a couple years to locate any major problems/leaks. Local Real Estate Brokers can also provide a wealth of information on the area and market and real estate outlooks. This website is dedicated to sharing practical financial knowledge.
Compare the costs of renting single family residences(SFR's), Apartments, Duplexes, with the cost of buying a mobile home and paying lot rent. The local Chamber of Commerce is also a wealth of information. They can give you information on population trends, new and current employers, potential plant shutdowns, as well as the general market conditions of an area. You should put together a list of questions, and you should evaluate the information you receive from the seller and compare it with the information you receive from outside sources. We receive more questions on due diligence than on virtually any other topic at MobileHomeParkStore.com and have written this manual to address those questions in great detail.
We respect both of you, your knowledge, wisdom, and your success. Without your help we would have been lost and probably lost money. Frank and I have definitely done this many times.
Visit the planning department to see if there are any new parks that are going to be built as well as the location of any vacant land zoned for mobile home parks development. Good school districts are often a great place to own parks. Many times these districts are in wealthy areas of the city and less affluent people are often looking for affordable housing in these areas to allow their children to be in these good school districts. Whether the park is on city water or wells, you need to check out the distribution systems. Find out what the lines are made of, whether there are signs of water leaks and whether the water pressure is adequate to all sections of the park. One of the most important items that you will need to have is a good purchase contract that has been reviewed by your attorney.
Sixty days is far superior to thirty if you can get it. And, of course, you can't get it unless you ask for it. Most people ask for thirty days because they are afraid that sixty days will scare the seller off, and less than thirty is way too short. That being said, I have done fourteen days of diligence on deals that I really wanted but that had a difficult seller.
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