There are a couple of other ways to look at a Mobile Home park, as a land bank and as a soil bank. Here's what I mean. Under current tax laws, there is little benefit in holding raw land for speculation. But with a Mobile Home park, it can make sense.
Several years ago, I was informed of a land parcel that was for sale with a small 23 space Mobile Home Park on it. There was only a 16 foot easement to the highway, so there was limited visibility. The 85 year old owner was tired of mowing almost 5 acres of grass. He was ready to sell it for $285,000 with $50,000 down and would carry back a 10% mortgage for 20 years. Actually, a few years later when interest rates started down, his estate voluntarily reduced the loan to 7% when we threatened to pay if off. They didn't want their cash flow yield to drop to less than 1 %currently offered by banks.
The land was bordered on one side by 1300 feet of riverfront and on the other side by a quarter mile of highway frontage that was scheduled for widening to 6 lanes. The property was in the direct path of development. Neither owner of the adjacent parcels could develop his because of the flood hazard along the river and the 60' depth along the highway.
One owner needed more depth; the other owner needed more highway frontage. The Mobile Home park land was high and dry – and big. This was a marriage made in heaven. We formed a joint venture and it bought the Mobile Home Park with anon-recourse Note and mortgage. Next, we used a Land Trust to join the 3 parcels of land to make an attractive 19 acre parcel with highway and river frontage.
When the highway was widened, instead of fighting the taking of 30 feet of our land by the Department of Transportation, we negotiated a trade. We swapped our frontage for curb and median cuts +FILL DIRT to raise the level of the waterfront land. Over the years, park rentals paid all taxes, interest and improvement costs while we waited for development to come to us down the highway.
At long last, after 19 years of steady cash flow, we sold an Option for $40,000 to a developer who agreed to pay a little over $1,000,000 for the land. My share was one third of this; not bad when you consider that I only paid $16,667 down and we have enjoyed enough cash flow to buy almost all the Mobile Homes in the park.
