Things to Consider When You’re Ready to Sell Your Mobile Home Park

Things to Consider When Selling Your Mobile Home Park

If you are ready to sell your mobile home park or are thinking of selling your mobile home park, now may be the best time to do so!

As baby boomers start hitting retirement age, there is more of a demand for affordable housing. Interest rates are low which is another reason buyers are eager to purchase.

However, while all this is happening, the availability of manufactured home parks is low and getting lower. Those looking to break into the market are finding it difficult to get approval and move on to a place where they can be profitable.

This all means one thing…it’s a seller’s market!

If you have been looking to sell your mobile home park, and feel this is a good time, there are some important things to consider. Here is some of what you should be aware of.

Getting the Best Price

The Best Option

If you are looking for the best price for your mobile community, get in touch with an investment group (like Mobile Home Community Buyers). An investment group or investment minded individual will give you a fast, accurate and transparent appraisal. You won’t have to pay a broker’s fee. You will be able to close quickly. If there’s not a good fit, the investment group will be able to get you in touch with a investor who can help.

Investors have resources (capital) at the ready and will be able to quickly get you your cash. Selling your park to an investor will be a fast and hassle free process.

When you’re ready to sell your mobile home park, you should be aware of all options.

Option Two

The second best thing to do is to go through a seller focused broker.

There are two types of brokers, buyer focused and seller focused. Buyer focused brokers will want the lowest price for their buyers. They may also want to make an off-market deal which will make your property exclusive to their buyers so they can maximize commission. This will keep prices low, extend the length of time it takes to sell your property and reduce competition, all which is bad for the seller.

Another situation sellers may come across are buyers who approach them directly. While you would think that these negotiations would put buyers at a disadvantage, it often ends up hurting the seller in the following ways:

  • Reducing or eliminating competition
  • Putting the burden of establishing the value of the property on you
  • Taking time and money to draft documents involved in the sale
  • Having to deal with the data and expertise that will allow you to get the best pricing
  • Ensuring you are protected when closing

This is all in contrast to a seller focused broker. A seller focused broker will do the following:

  • Market your property to all relevant buyers, even those from outside the region
  • Create a competitive environment for your property
  • Get a fair price for your property backed by market comps and data
  • Shorten the time it takes to close the deal
  • Get you more qualified offer
  • Give you the guidance and proper representation you need throughout your deal

Finding Out How Much Your Park is Worth

If you are looking to sell your mobile park community, you will need to know how much it is worth. You should start by finding out the following property variables:

  • Size of the property
  • Location
  • Occupancy rate
  • Cash flow
  • NOI
  • Private vs. public utility connectivity
  • Park owned homes vs. lot rentals
  • Amenities
  • Financing availability
  • Market conditions
  • Available inventory of similar properties
  • The price of comparable properties
  • The asking price of comparable properties

Figuring out these variables are all a part of market analysis although a property appraisal will also help you come up with a fair price.

A good seller focused broker will provide you with a no obligation market analysis that shows you the cap rates of other properties that have sold in your market as well as the potential cap rates for your property.

A cap rate can be found by dividing your property’s NOI by the sales price. The lower the cap rate, the higher the sales price and the higher your return.

Note: A ½ point difference in the cap rate can mean millions of dollars more or less in your pocket.

How to Mitigate Taxes

No one wants to pay high taxes after the sale of a property. In order to reduce the amount you will have to pay on tax, you can use a 1031 exchange.

There is a provision in the Internal Revenue Code (IRC) Section 1031 which allows you to postpone paying tax on your sale if you reinvest your proceeds in a similar property.

Many owners may sell their properties and reinvest the money in investments with less intensive management responsibilities and opt for a triple net property (NNN) in exchange. These are properties where the tenant is responsible for the rent and utility as well as the real estate taxes, maintenance and insurance.

This can be beneficial to owners since there is a reduction in responsibilities. It also allows them to restart property depreciation schedules and receive steady income and long-term stability.

A Delaware Statutory Trust is another way of mitigating taxes. A DST is a separate entity that allows smaller investors to own high-quality institutional level and professionally managed commercial properties as owners, not partners.

Like a 1031, it is also a passive investment with decreased responsibility. It provides an extra layer of protection through non-recourse debt preference and offers stability and other benefits.

If you think the time is right for selling your mobile home community, you can avoid long selling periods and broker’s fees by consulting Mobile Home Community Buyers. We buy mobile home communities in any condition, making sure you walk away with cash in hand. We are able to secure parks all across the country and our team of experts will work to keep your park thriving.

The decision to sell your mobile home community is not an easy one to make. Hopefully, this article provided you with information that will be useful if you do decide to sell. Good luck choosing the option that works for you.