By John Chason – Director of Acquisitions
So, you want to invest in mobile home parks. Depending upon your specific situation you need to ask yourself, “Do I want a “fixer upper” or do I want a “plug and play?”. Once you develop your desired acquisition criteria you need to learn about the different types of parks in which you can invest. Generally, mobile home park investments fall into one of three categories: Value-Add, Turnkey, or a Hybrid. Let’s jump into a brief summary of each investing style.
Value-Add parks are assets that need various amounts of revitalization. These are your “fixer uppers”. To “add value”, you will need to put in some work that will stabilized the park over the course of 1 to 24 months. That work will require making improvements to the physical park, the homes, (both inside and outside), and the day to day operations and management of the park. The overall goal is to increase revenue and decrease expenses.
Compared to the turnkey park, the value-add strategy has potential for higher returns but also a higher amount of hard work. This work requires someone that has the experience to make the necessary improvements in order to get the most out of your investment and increase the value. When all of the improvements are complete, your result should be a stabilized, or turnkey park.
Turnkey parks require no additional improvements to realize a great positive cash flow investment. These parks are your “plug and play” assets that have been totally updated in both functionality and esthetics. The overall goal here is to continue current operations and management, adjusting as needed to sustain an ongoing business.
Compared to the Value-Add, the Turnkey is a lower risk option although upside valuation is not as great. But you will have peace of mind that your investment is up to date requiring little or no “elbow grease” and you will also have a predictable revenue stream.
A Hybrid park is just that, a various mix of attributes from both Value-Add and Turnkey assets. A park may require some light rehab, landscaping, the infilling of homes on a couple of empty lots, or an upward adjustment of monthly rent to catch up with the current market.
Value-Add, Turnkey, or Hybrid? What’s your ideal park investment style? Now would be a great time to “bullet-point” your specific park investment criteria and let everyone know what you are looking for. This is a great way to find exactly what you want.