Just because you’ve put a ‘for sale’ sign in the yard doesn’t mean your mobile home park is ready to sell. Too many hopeful mobile home park sellers jump the gun and try to get offers before they’re ready. This is a mistake; you could be missing an opportunity to improve your park’s value with some quick and simple fixes.
If you were going to sell a used car, you wouldn’t just slap a sign in the back window and hope for the best. At least I hope you wouldn’t. You’d wash it, clean out the inside, and maybe do some basic repairs. You’d check out what similar cars are going for so you could set a competitive price.
Smart sellers do this because they know they can expand their offers with just a little bit of elbow grease. Do the same thing for your park by running through the mobile home park quick evaluation sheet below. It’s a great way to maximize your profit while minimizing your time investment when listing and valuing your park using a simple due diligence checklist.
There are six steps that you need to take before putting your park up for sale covering the appearance, infrastructure, and overall value of your park. Use this resource to do a final audit before you start the sales process. My mobile home park quick evaluation sheet includes these recommendations:
These six steps will ensure your park is operating at maximum efficiency before you put it up for sale. If you run into issues in any of the above areas, continue reading for tips to correct the deficits that will eat up your park’s profits.
Most parks I see have a park owned home or three, usually because a tenant decided to abandon it and the park owner wanted to avoid the expensive fix-ups needed to resell it, so instead they kept it and just rented it out. Maybe they were hoping to increase the value of their mobile home park appraisal but, often, that’s going to be viewed as a liability.
The problem with park owned homes is that for the added value of the property, the owners must take on a lot of responsibility. So the home might be worth $8000, but if you rent it out, you’re going to have to do all their repairs and maintenance requests.
So how do you fix the problem? Simple: sell those homes before you try to sell your park. Here are a few ideas to get you started:
Buyers are all over the place on whether they’re willing to buy an MHP that includes park owned homes. Me, I’d prefer not to but I might have some wriggle room if I think I can sell it. Mainly, I just don’t want to drive into a park and see a ton of fixer-uppers for sale. Move it or sell it, just don’t expect me to buy it.
I’d rather see a vacant park owned home than an empty space because a vacant home has potential (unless the home is a complete throwaway, in which case just haul it out ASAP). What I don’t want to see is a ton of empty spaces or a ton of really beater homes that are empty or rented out. I like to see nothing higher than a 10% vacancy rate in my parks. That means if you have 100 spaces, no more than ten of them are empty. Above that, I think, “If they can’t fill the space, how can I?” Here are a few things to consider:
Now, if you don’t have a bunch of park owned homes or a high vacancy rate to worry about, you should consider how selling your mobile home park will be affected by its overall look. Any potential buyer is going to want to do a drive through of your park. Be prepared to improve your curb appeal.
Beauty is in the eye of the beholder, which is why it can sometimes be hard for MHP owners to see the faults in their parks. Consider doing a short exercise. Bring a friend with you for a tour of your park and ask them to be brutally honest about how appealing it is from the road. Often, the person might be willing to point out issues you’ve gone blind to, including:
All the above steps are the steps that make your park pretty on the surface. By fixing them, you’ll be able to spur some interest. However, there are some hidden internal factors you need to consider before you put that park up for sale as well.
A park might be perfect on the outside, but that isn’t going to make it sellable if you have a major environmental issue or code violation. Infrastructure issues are going to stall your park sale if your buyer is depending on bank lending. Most lenders aren’t willing to loan money when there’s a major infrastructure issue with the park; it’s the backbone of your park, what delivers utilities to your tenants, and keeps them safe. Before you put a park up for sale, or choose a realtor, agent or broker, do the following:
After you review your park for potential problems and curb appeal, you also want to look at one final factor. That’s the potential of the park. If there are areas you could be making more money, you want to use them to put your park in a positive light.
Some mobile home park owners might be overly generous on land allowances for tenants, or might not have the money to pay to set up utilities for a potential new space. If you have space enough to add another tenant, consider that in your evaluation. Just because you haven’t chosen to develop the land for use doesn’t mean a new owner won’t. Look at the following:
After you’ve reviewed all these factors, you’re about ready to advertise your park for sale. The final step is calculating the right asking price. Having a good asking price will get buyers interested—and keep you from undercutting yourself with an ask that’s too low.
If you have an appraisal around, look at the comps—that will give you a good guide for valuation. Most park buyers are buying for what your park is worth now. That’s why you need to consider the following factors:
The valuation is the nuts and bolts of your sale; be sure to take the time to go over this mobile home park quick evaluation sheet before your MHP even goes up for sale. Anyone considering purchasing your park is going to look at these factors, so you should know them like the back of your hand—able to recite them in your sleep.
While the curb appeal of your park will get buyers looking, it’s the price that will bring them to the negotiating table. The closer your park is to turnkey, the more appealing that park is going to be. Very few people want to buy parks that are fixer uppers. They want to be able to start operating them next day. If your park is at maximum efficiency, that’s going to go a long way towards getting you a fast sale.
Another good way to get an idea of what your park is worth is to contact a direct buyer. Direct buyers give you a fixed price offer based on market rates, so you can get a general idea of how much your park is worth to buyers. After all, how much someone is willing to pay for your park is the best indicator of its value.