If you are buying your first mobile home park, you may be unsure of how to get started. Here are some tips that will make the process run as smoothly as possible.
A mobile home park is a great business opportunity for those looking to break into the real estate market. The properties tend to be low competition so they can be purchased without major capital, they are low maintenance and the lots are in demand so there is a high occupancy rate.
Know Your Goals
Before making a purchase, it’s a good idea to get familiar with your financial goals. Knowing how much money you are looking to make will help you find a space that offers the right amount of lots and works within your budget.
Once you have a few properties collected into your database, start calling investors like Mobile Home Community Buyers who have the listings to find out about their underwriting, package, P&L or current rent roll. Question them to find out how they arrived at their revenue, expense, cash on cash return, NOI, CAP rates, debt to equity rates and more.
After talking to a few investors, you will have a more comprehensive knowledge of the market.
Hone in on Your Property
Once you find a property you think will work, be sure to go through the process of understanding all the profit and loss details. You should also make your own P&L report outlining your goals for the next 3 -5 years.
At this point, you will also want to meet with a lender or loan broker so you can better understand what kind of profits you will be making after payments.
If it all looks good, you can move forward to draft a purchase agreement. In addition to meeting your financial terms, it should also include all the data and disclosures you are looking for as well as the contingencies and schedule to close.
Before closing, you will want to verify that all the information you received on the property is verified. This might take a review of bank statements, deposits, utility bills, taxes, insurance, maintenance expenses and more. This will help you determine the condition of the property so you can decide how much will be required to repair and maintain it.
Location will also play a role in the due diligence process. The location will affect how much you can get for the lots as well as the licenses, permits and restrictions that you will need to acquire moving forward.
It is hopeful that everything goes smoothly and that nothing found in the due diligence process causes you to withdraw from the deal. Remember, you can always negotiate with the owner on the price to cover any damages that were revealed in the later stages of the deal.
If it all looks good, stay on top of the powers that be to make sure they deal goes smoothly. Check in with the lender to see to it that the loan is moving along and get updates with the title company to ensure all calculations are correct. If so, sign on the dotted line.
Now that you know the steps for acquiring a mobile home park, you are on your way to making a successful business investment. Good luck in your future endeavors.
If you’d like to talk more about selling your mobile home park or are interested in buying a mobile home park, look no further and get in touch with us today.
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