Step By Step Process to Buying a Mobile Home Park!

mobile home park

Original Article:

I vividly remember the day I decided to buy my first mobile home park.  I was a complete beginner and didn’t have a clue what to do first, second or third.  I spent hours reading and reading and talking with other investors.  It seemed the more I learned the more confused I became.  What I didn’t have was a simple and concise overview of the entire process from beginning to end.   If you are beginner, you’ll save you a lot of time and money if you memorize and follow this step-by-step process to buying your first Mobile Home Park!

Goals, Objectives & Purchase Criteria

Goals & Objectives are an investor’s best friend. A good investor is 100% clear about what they want to accomplish and why it is important.   Goals should be supported by short to medium term objectives that are specific, measurable, attainable, relevant and time specific.  Here are some examples:

  • Goal:  10% cash on cash return each year for 7 years and a 100% increase on capital invested
  • Objectives:  meet with 3 brokers who specialize in MHP sales by May 31, complete an analysis of 7 MHPs currently on the market by June 30th, write 3 offers by September 30

Purchase Criteria are defined based on the goals and objectives and serve to focus the investor on a property type, geography, size, condition, price range, etc…  My current purchase criteria include the following: MHP, N. California, 30-50 spaces, city services, priced between $1M and $1.5M, 80% occupied or greater and rents 25% below the comps in the area.

Market Knowledge & Prospecting

With goals, objectives and purchase criteria in hand, an investor can enter the “deal flow” to learn about the market and identify any good prospects.   Start your search on the Internet and visit websites like LoopNet, Craigslist and mobilehomeparkstore.  Obtain a list of every mobile home park in your target geography and import it into Excel (or another database tool) so you can add notes and quickly sort, search and select out parks that appear to meet your purchase criteria.

Call brokers who have MHP listings and ask them to provide their underwriting, package or a P&L and current rent-roll.  The broker will want to get to know you so be prepared to share your goals, objectives and purchase criteria.   Work through all the numbers to understand how they arrived at their revenue, expense, cash on cash return, NOI, CAP rates, debt to equity ratios, etc…   If the package includes comps, review them closely to understand how the subject property compares in terms of rents, vacancy, revenues, expenses, mix of singles to doubles, etc…  Do a “drive-by” that includes the comps, other similar properties and of course, the subject property.

Within a few months you’ll have good knowledge of the market(s), be proficient at evaluating properties and quickly able to identify any that fit your criteria and look like good prospects.

Qualify the Property

So you’ve got something that looks like a good prospect, now what?   If you’ve not already done so, ask the seller or broker for underwriting, package, P&L’s and rent-roll and any other financial information they’d like to provide.  Work through their data and reports so you understand how they arrived at their numbers and confirm their calculations.    Then reconstruct the current P&L using the rent-roll as the basis for the revenue number, adding in utility reimbursements, laundry, propane sales, storage, etc.   Complete the same exercise on the expense side.

Build a projected P&L for the next 3-5 years that reflects your assumptions and plans for the property including increases in revenues, decreases in costs and the resulting increased NOI.   Now it’s time to engage a loan broker or MHP lender and see if they are interested in financing the deal and at what terms.  Plug these terms into the projected P&L to calculate the cash on cash return and other key rates and ratios.  If the numbers meet your goals, it’s time to “put it in writing” or disengage and let the seller/broker know you are continuing to look at other properties.

When drafting the purchase agreement, in addition to the financial terms, make certain it meets all your requirements including: data and disclosures you want from the seller, contingencies and the timing or schedule to close.

Due Diligence

You’ve started the financial due diligence and need to continue forward and take your investigation to the next level.  You’ll want to review copies of bank statements to verify deposits and see copies of actual bills for utilities, taxes, insurance and other maintenance items.

Physical due diligence is about understanding the current condition of the physical elements of the MHP including homes, structures, electrical, gas, water and sewer/septic systems, etc…   You want to make grounded projections about operating costs for the 3-5 year P&L and estimate any capital costs over your expected hold period for upgrades and replacements.  Be sure to ask the seller for a list of all capital improvements that are not reflected in the P&Ls.

Locale is the final element of due diligence and it’s about location!  Locale considerations include the economics of the market, zoning, land use and development plans for the subject property and neighborhood and current compliance with respect to licenses, permits, restrictions and regulations.

Remember to triangulate all data and answers with multiple sources to ensure completeness and accuracy.  Hire professionals to inspect the complicated and expensive infrastructure elements.  Take a phased approach to releasing contingencies to demonstrate good faith with the seller and buy extra time to complete the investigation before a final “sign off” and acceptance!


By now you should be working to clear those final contingencies.  Hopefully, the due diligence process confirmed your initial impressions when the property was qualified.   If not, prior to releasing contingencies, final negotiations and adjustments to price or other terms can be made between buyer and seller.   You should be contacting the lender every couple of days to ensure they’ve completed the appraisal and the “first reviews” by the loan committee have been positive.  It’s not unusual for the bank to ask for more documents, more signatures and more “blood” so be prepared.  Get to know your title officer and periodically ask for an updated preliminary closing statement and work through the numbers and calculations.   Be certain to verify the security deposits and carefully review the prorations for rent, taxes, propane in the dispenser tank, supplies and pre/post paid items like licenses and permits, etc…   Finally, have the seller provide a list of inventory including tools, office equipment, furniture in the club house, etc…

RelatedMobile Home Park Due Diligence Checklist!


It’s the day of the close and your hand is tired from signing all those documents!  There are no doubt some surprises ahead and lots to learn.  Take comfort in the fact that you’ve followed a disciplined approach by defining goals, objectives and purchase criteria, studying and prospecting the market, qualifying several properties, completing an exhaustive due diligence process and finally, closing on your terms with significant attention to the final prorations, deposits and inventory.

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