What we look for in a mobile home park.
Four characteristics tell us within an afternoon whether a community is worth diligencing. None of them are the cap rate.
Mobile home parks get pitched at us almost every week. Most of them aren’t deals. Not because the cap rate is wrong — cap rates can be re-traded — but because the community itself is structurally compromised in a way no amount of capital fixes. After enough of these, you start to know the four things that actually matter, and you can usually triage in an afternoon.
First: ownership of the dirt under every pad. We buy parks where the operator owns the land and rents the pad. We do not buy parks where the operator also owns and rents out the homes themselves, and we generally pass on parks where a meaningful share of homes are owned by an outside investor renting them out as a side business. The clean version is a tenant-owned-home community. That’s the asset class.
Second: public utilities to each home. Master-metered water, septic systems, and private wells are all manageable, but every one of them adds a category of operating risk that institutional buyers pay less for. A park where the city water meter is at each home and the sewer runs to municipal lines is worth more, performs better in a stress year, and is far easier to finance through a community bank. We’ll consider master-metered, but the price has to reflect what we’re assuming.
Third: a stable lot rent that has been raised at least once in the last three years. The number isn’t what we care about; the pattern is. An operator who hasn’t touched lot rent in five years is signaling something — usually that he’s undermanaging, undercapitalized, or burnt out. Sometimes it’s neighborly inertia, which is its own problem. Either way, we’re going to underwrite a multi-year program of bringing lot rent to market, and the size of that gap is the deal.
Fourth: a manager on-site or near-site who’s been there long enough to know the tenants by name. The math on a park can be solved in two hours. The operations cannot. The on-site manager is the asset. We’ll buy a community where the manager wants to stay, we’ll buy a community where we’re bringing one in, and we’ll pass on a community where the seller’s answer to “who runs the day-to-day” is “a guy.”
Everything else — fence condition, occupancy, road quality, the age of the home stock — those are line items. They show up in the price. The four above don’t show up in the price. They decide whether the asset is one we’ll still want to own in 2036.
If you’re thinking about selling a community that fits this profile, the conversation is short. We don’t need a teaser, a tour, or a sales process. Send a rent roll and a P&L. We’ll tell you within a week whether we’re a real buyer.