Yes it is, but do your homework - Posted by ray@lcorn
Posted by ray@lcorn on October 18, 2003 at 12:32:12:
Drew,
Your situation is one that many would search a lifetime for. I assume that the land is free and clear? If so, then you have options available to you that would not be available to others.
The key to developing a park is staying power. There can be a long time lag between getting lots ready and having them occupied. Having the land paid for gives you the luxury of phasing the construction costs to develop only as many lots as can be filled within a short time. The perfect scenario would be to build only as many as can be filled in a year, then do the same thing each year until you complete the project. Construction can be financed with a local bank, generally 100% of the cost of improvements, using the land as equity.
By the way, I would recommend that you develop the park as a land lease park only… no rental homes, and in-park sales of homes only if you can afford very late model homes (almost new) or partner with a dealer to supply the homes. Stability, the greatest value characteristic of a mobile home park, is lost if you fill it with rentals or older homes. Don’t make the mistake of trading short-term cash flow for the creation of long-term value.
But before getting too far ahead of the game you need to do some basic homework. The first step is to check with the local planning and zoning officials to find out what zoning and development standards are required to develop the property. If you need a rezoning, then I would advise engaging a local engineering firm to do some preliminary work before initiating the rezoning. Once you apply for a zoning change you’ll face questions from all sides in short order. It’s best to have as many of the answers ready as possible.
A local engineering firm can help you with the basic site planning that will yield the most efficient design, and also address hot-button issues such as access, storm water detention and utility design. Once you know how many spaces can be built and the basic design of the roads and utilities, then the engineering firm can either give you a ballpark development cost based on area norms, or refer you to contractors who can provide a closer estimate.
What the engineers will not be able to help you with is the market information that gives you an idea of how many lots to develop per phase. That takes some footwork too. You’ll need to analyze population growth in the immediate area, vacancy rates and rents for both parks and apartments, and gather some info on mobile home sales in the area. Talking to dealers may give some insights there, but I am more inclined to get the information from reliable sources such as the number of building permits issued for mobile homes. Put that information together to estimate the likely annual market penetration you can expect, and put it together with your development costs to formulate the timeline for your plan.
Then you are ready to talk about financing, unless your grandfather also left a pile of cash? You’ll need to put all of the above information into a business plan and loan proposal. This will include projections of all construction costs, broken into whatever phasing plan makes sense; a projection of income and expenses once the spaces are occupied, and; a statement of the source and use of funds, i.e. the loan proceeds, showing how the construction will be funded as progress payments are required.
There is only one book I know of that deals specifically with developing mobile home parks. It is an excellent text, and it covers in detail most all of the issues I have summarized here. The book is “Development, Marketing & Operation of Manufactured Home Communities” by George Allen, and is available on his website at MobileHome.com - All you need to know about Mobile and Manufactured Homes
My own book, “DealMaker’s Guide to Mobile Home Parks” is available in the bookstore here on CRE Online. This book focuses on the acquisition and operation of existing parks, rather than development, but the market analysis and financing sections do apply directly to a development project.
Hope this gets you started in the right direction. I usually tell people that development is not for beginners because of the risks. However in a case like yours, with inherited land and an existing park, the risk is greatly reduced. Do make sure you perform a complete market analysis though, because your success depends on it.
ray