develop new MHP? - Posted by Chris

Posted by ray@lcorn on May 15, 2003 at 09:26:45:


In broad terms, the key to evaluating any development project is to figure out what it will cost to build the property and get it to a stabilized occupancy level. That means you have to establish not only the hard costs (e.g. land cost, construction cost and capital cost), but also the soft costs. Those include the expense of carrying the property until it is “stabilized”, meaning the occupancy reaches a level of positive cash flow. Key to establishing that estimate is the absorption rate of the new units (spaces).

That’s where market research comes in. You need a reasonable estimate of the time it will take for the park to fill up. Until it reaches a stabilized occupancy level it will cost money to carry the project. The info needed to make such an estimate (and that’s all it ever is) include population growth rate and the average household size, new building permits, and if available the number of new mobile homes placed in the market per year over the last 3-5 years. Some localities permit mobile homes separately from general building permits. That makes it much easier to get an accuyrate count of the total market, and you can also survey existing parks to get a count of existing supply. Don’t forget to deduct the number of mobile homes that go to private land… that can be a significant portion of the market, and park spaces likely won’t draw those homes. Then you can derive a reasonable expectation of market share and determine how long it will take to fill the spaces.

As to how many spaces you can build on the parcel, you need the development standards for the zoning district. Go back to the city planner and get a copy of the regs, then do a rough estimate of street layout and space count based on the density requirements in the zoning ordinance. Once that is known, a local engineer can likely give you a rough estimate of the development cost based on the lineal footage of the streets, water and sewer.

Lastly, construct a projected operating statement for at least three years, and possibly five depending on the number of spaces and the absorption rate. Don’t make the mistake of doing a proforma based on a full park. It takes time to get there, and you need an accurate picture of the funds needed to carry the project while the lease-up is in progress.

Hope that gives you some guidance. If I raised more questions than I answered (a common occurence!), get them down in a follow-up post and we’ll deal with them as they arise. Say hey to Dot for me!


develop new MHP? - Posted by Chris

Posted by Chris on May 14, 2003 at 22:47:34:

Hi Ray,

Im looking at 4 acres in town,(1 mile from WalMart) zoned mini industrial. It has some curb a gutter and some sewer taps are in place. (Will find out specifically later)I think someone long ago started to develop a MHP and for unknown reasons quit or didnt follow thru. The current owner is willing to Owner finance and inherited the property. Realtor says she needs the income.I would like to entertain developing a new park. There are two large MHPs in the area (18k people)nearly all of the homes in each park are park owned rentals.(real dogs,and cheap transient rents) Apt complexes are all old (latest built in early 80’s)(too expensive to build based on low area rents)

The average age in this town is “old” and id like to entertain developing a real park where we have a fence around the property and make it nice for folks to put there own homes. Put some trees in, a gate,(un-manned)and mkt somewhere nicer to live (with MH) than what is available. Lot rents could be $200ish. Zoning is an issue and the property would have to be rezoned. The city planner doesnt feel like it would be too hard b/c all other property surrounding is zoned MH.

What kind of mkt research do I need to get? Is this where I need feasability study? How many single wide homes can fit on 4 acres? The lot is 300ft wide by 584 deep. There is an old street in a horseshoe shape. I have the capital (but I expect at least 25% back on it) and am really looking to do something bigger than SFH’s and duplexes. What kind of pre-mkting to get the homes signed up before finished. Do you do a clubhouse? I would not have a live on mgr. (Park too small)What about RV spots?

These are all my pre thoughts and questions. If I cant get enough homes on this place to mess with it… let me know.
I appreciate and invite all thoughts and experience.