Mobile Home Park Due Diligence
When you placed a mobile home domestic park under contract you’ll sincerely want to have a stipulation in the contract a good way to permit you to verify what the seller has stated up to now in addition to evaluate the overall feasibility of the acquisition. Due Diligence will look at the physical, monetary, demographic and marketplace feasibility of the challenge. This time period is generally between 30 and 60 days. In conducting your due diligence you are looking to pick out something that poses a capability issue and which you are able to exchange or restore. These generally address the cleanliness of the park (junk & trash piled up), mismanagement, loss of rule enforcement, collections, prices that can be decreased.
But extra importantly you’re seeking out the one’s problems that you may not be able to repair or so one can be very high-priced to restoration. These styles of troubles normally address the scale of the lots, reputation, troubles in the local marketplace, flood plains, drainage problems, terrible configuration of plenty, water, sewer, electric powered, and gas line troubles.
In engaging in your due diligence you could call on experts in surveying, accounting, marketing, financing, plumbing, electric, and legal.
Ask the Seller to provide you with the subsequent (if relevant):
1. City, County and State Permits and Licenses
2. Sewer Plant Records and Readings
3. Water Well Tests and Compliance Records
four. Existing Surveys or Environmental Reports
5. Water and different Utility Meter Reading Records and Formulas
6. Property tax payments for the remaining 2-three years
7. Copy of modern-day coverage and binder showing rates and coverages
8. Current staffing list such as function, wages, activity descriptions
9. Any drawings and maps of the park and infrastructure and size of lots
10. Any Contracts as a way to be transferred to consumer at closing (laundry, trash, smartphone)
eleven. Signed Rules and Leases for each resident
12. Bank Statements
thirteen. 2-3 years Tax Returns
14. 2-three years Profit and Loss
15. Certificates of Occupancy
sixteen. List of Capital Expenditures for the last 3 years
17. Listing of any current park infrastructure issues(water, sewer, gasoline, electric)
18. Rent Roll with unique homesite variety, name of resident, circulate-in date, monthly hire, modern-day balance, additional fees, number of occupants, and a quick history of the resident (accurate resident / horrific resident, special instances, and many others)
19. Names and phone numbers of all of all contractors used inside the last few years – plumbers, electricians, propane, gasoline, roto rooters
As you’re receiving these statistics from the Seller you will want to assess it with the opposite information you obtain from outdoor assets.
Fifty-two basic areas to cowl in the Due Diligence duration now not necessarily in any order:
1. Park Location Issues: Is it close enough to shopping, employment, faculties, transportation. Will capacity citizens be capable of finding the park?
2. Flood Plain: Is the park placed in a flood simple? If so, while changed into the ultimate time it has flooded? If the park does flood, are the houses excessive sufficient to stay undamaged? Do the homeowners have flood insurance?
3. In most cases, shopping for a park in a one hundred yr or 500 yr flood region will not come returned to bite you. However, you should, in reality, recognize the dangers involved. Most of the time your renters will just have to deliver flood insurance and your lender will require the identical to your buildings and utility connections.
4. Noise Problems: Loud outdoor noise can regularly be a deterrent for living in a sure cell domestic park. Being located near highways or busy streets and also nearby trains can be very stressful to capability citizens.
5. Find out if the park is required to be licensed and if so that it has the required license. You will need to check that the park is running in compliance with the license. If a park has 50 devices but is licensed for most effective 25, you may have potential issues. The license may be issued by using the State, County, or Local authorities. Often it’s far issued with the State Board of Health. Some towns have legal guidelines that kingdom that if a positive percentage of the houses in a park that has “grandfathered” zoning is destroyed, then the ones plenty will no longer be allowed to be rented again. This can appear from fire, tornado, storm, and many others. Check the neighborhood codes.
6. Review any park inspection reports performed via the State Board of Health or other City/County inspectors. In a few states, specifically the ones wherein licenses are required, the kingdom does an annual inspection and produces a record with notices of any violations. It is ideal to peer those violations and make sure that they have got been corrected.
7. If you’re thinking about hiring the modern management you could need to have buddies or pals make some calls to the property and see how the management handles the calls. Also, if you visit the supervisor’s home and it isn’t stored up exact and that they have a hard and fast of policies for themselves it can be an illustration which you have to search for different control.
Eight. After you have the park under contract and usually after you have got the proprietor’s permission it is simply an awesome concept to interview some of the cutting-edge park citizens. They are commonly complete of information when it comes to finding out how the park is truely operating. You will often pay attention approximately water problems, sewer issues, and any other commonplace issues through talking to the citizens.
Nine. Another desirable supply of records would be the neighborhood cell, domestic dealers. They usually realize approximately maximum of the parks and might provide you with statistics at the parks recognition, whether or not they’ve within the beyond and could inside the destiny refer the park to ability citizens, and so on. You may find out if they have change-ins or different reasonably priced homes on the market.
10. If feasible, you may need to go to the park at diverse times of the day, morning, midday, after dark as you will be capable of seeing the park as it’s far. It is also beneficial to peer the park at some point of the week and on the weekends. This will come up with a better indication of parking, occupancy, lighting, as well as noise degree.
Eleven. The neighborhood Chamber of Commerce is likewise a wealth of facts. They can come up with statistics on populace developments, new and modern-day employers, ability plant shutdowns, as well as the overall market situations of a place.
12. Local Real Estate Brokers can also offer a wealth of statistics on the vicinity and marketplace and real estate outlooks.
13. Good faculty districts are regularly an amazing location to personal parks. Many times these districts are in wealthy areas of the town and much less prosperous humans are often seeking out low priced housing in these areas to allow their youngsters to be in those appropriate faculty districts.
14. Contact the Property Tax Office: to test tax prices and whether taxes are contemporary. Learn what their assessment methods are so you can estimate how much you’ll be paying in taxes if you buy the park.
15. Verify the rent rolls as well as copies of receipts to affirm that the amount truely accrued is being reflected efficaciously. Often times, park proprietors neglect to tell you that they supply a few human beings discounts (seniors, buddies, relatives, and so forth).
16. For coverage functions make sure to verify the pet restrictions in addition to the enforcement of such. Most insurance providers do not allow risky breeds of dogs or even dogs over 20 – 30 pounds.
17. Water Lines: what are they made of? Are there symptoms of water leaks? Is the water stress suited? Many times you will have some areas of the park where the water strain is an awful lot decrease than the rest.
You can evaluation payments from the software agencies from the equal month over a couple years to find any foremost issues/leaks.
18. Sewer Lines: generally you may have problems with older sewer lines: clay pipe and skinny walled plastic pipes. Clay pipes will allow big tree roots to begin developing inner with a purpose to begin inflicting backups. In addition, clay & thin walled sewer pipes will also generally tend to collapse and then plug up. You may be able to have a digicam check out the pipes, in addition, to have them professionally blown out with excessive pace water jets as periodic upkeep.
19. With electric provider, you will want to check whether the electrical is above ground or beneath a floor. If above, you may usually be liable for the primary electric powered poles so check the electric poles to see if they’re rotting near a ground stage. These may be quite high priced to update. Another capability electric powered trouble is that maximum of the houses now requires 100 to two hundred amp provider. Many of the older parks have the electric carrier with 30-50 amps provider. This will commonly require an improvement so that it will generally value $500-$800 in elements and exertions to upgrade.
20. Gas provider. If you are responsible for the fuel meters and contours then you may need to have the system stress examined as a small gasoline leak can reason your carrier to be shut down till it is placed and repaired. It is likewise an amazing idea to have this done on a habitual foundation to keep away from capability issues.
21. Fire Hydrants positioned nearby. A question your coverage enterprise is positive to invite.
22. Trees: Many instances you may see a park that is complete of huge beautiful timber and it is able to appearance actual high-quality. However, these trees will certainly fee you down the street. You need to maintain them trimmed, eliminate antique and useless timber, clean up the leaves every year, as well as auger sewer lines that end up full of tree roots.
Falling branches are often one of the maximum likely coverage claims.
23. Roads: are the roads in appropriate restore, do they want to be resurfaced, are they huge enough, are there speed bumps, and so on? Roads that are not maintained are often one of the maximum sizable complaints you will get out of your citizens.
24. Drainage Problems: It is advisable to realize how a cellular domestic park drains after heavy or sustained rains. Even if the park is not in a flood quarter, it may have a horrible trouble with standing water and puddles. Getting rid of the extra water can be high-priced and hard.
25. Sewer Plants: while a cellular home park has an actual sewer device, lagoon, or is on septics that is every other region in that you have to without a doubt find out as a lot as viable. You need to recognize how the machine operates, whether it’s miles assembly the EPA pointers, what it prices to run, what upgrades have been made, whether or not it is jogging at complete ability, do you want to have a licensed operator, how many hookups it’s far licensed for, etc?
26. Lift Stations: are they good enough, do they have caution lighting, are there backup pumps?
27. Walk property during the day and at night. You will uncover many issues including smells, canine barking, events, hidden trash & junk, water leaks, sewage puddles, antique electrical containers
28. Water Wells: what sort of gadget, how deep are the wells, water stress, any previous violations or issues, backup structures, what does it cost to perform, if the proprietor is the Licensed operator is their operators within the area which are available and affordable to function, are you able to send your supervisor to lessons to gain the operators allow/license. How many spaces is it certified for?
29. Who will pay what? Utilities, Cable, Mowing, and so forth: discover all the ones hidden expenses that the proprietor takes care of affordably (does he haul the trash to the sell-off?). If the trash isn’t being hauled off, what are the citizens doing with it?
30. History of Rent Increases: have the rents been elevated on an everyday basis?
31. Count the plenty – a few may additionally were combined and many parks have bizarre numbering schemes.
32. Late Fees: take a look at the bank deposits and compare with the rent roll. When are the rents coming in, are late expenses being charged?
33. Security Deposits: get a certified listing of Security Deposits from the proprietor. If afterward, someone claims to have a deposit that isn’t on that list you have it in writing from the proprietor.
34. Check the leases: is there any extraordinary language within the leases? Are they month to month. Are there long-term leases in order to make it difficult to elevate rents or submeter water?
35. Hazardous Materials: don’t even recollect shopping for a park without having a Phase 1 environmental have a look at doing. If there are any underground garage tanks, above ground garage tanks, chemical drums, buried waste, lagoons, stained soil, fuel pumps, vehicle repair shops, electrical transformers, asbestos in constructing, and many others., you will be prone to America Gov’t for hundreds of thousands in cleanup prices.
36. When looking at a park make sure you take a look at into whatever that doesn’t seem right. Are there easements that don’t make an experience, are there oil wells on the belongings, and many others.
37. It is likewise really helpful to achieve a present day or current survey of the park. You need to make sure you are shopping for what you suspect you are buying. Are a number of your cell houses over the property line. Are there fences or sheds over the property traces. With a brand new owner, the adjoining land proprietors may additionally use this time to put into effect some of those problems. Check the prison description with the survey and with your agreement and assurance deed.
38. Seller says the property can be increased. Make positive the modern zoning will permit the proposed enlargement. Also, make sure that it’s miles possible: Where can you tap into the water, sewer, and other utilities? Do the current water wells and sewer plant has the capability to carry extra houses. What are the impact fees? What are the possible expenses to increase?
39. Lot Sizes: one among the most important issues with older mobile home parks is they were built for 10-14′ x 50-60′ homes. As most of the more recent houses are sixteen’ x eighty’ and up, this could emerge as an actual problem when changing houses or filling vacant plenty. In addition, a few cities/counties are requiring homes to be a sure age. Thus, shifting an older 12′ x 50′ domestic into your park might not be a choice.
40. Vacant websites. There are 50 websites and 10 vacant. Are those 10 websites ready and capable of taking new houses? Are the water and sewer lines marked? Is there gas and electric powered? Does the electrical need to be upgraded earlier than accepting a new domestic. What are the setback requirements? What age of homes can be moved into the park? Is the plenty in such an arrangement in which a domestic can surely be located into every lot without transferring other homes around?
Forty-one. Are the present day units tied down? Many older parks have gadgets which might be in there and have been never established properly such as being tied down consistent with code if even at all. I even have experienced this two times within the past. One time a twister hit certainly one of my parks (actually 2 parks subsequent to every different). All in all, we lost over forty houses out of 100 and the houses that have been truely tied down and set up effectively had been a whole lot less damaged than the ones that were no longer. Another time we had some excessive winds in certainly one of my parks and a pair of the houses simply blew over as they have been not tied down. 42. Street Lights: drive via at night. Who is responsible for the street lighting fixtures? Who will change the bulbs? If a mild goes out who will fix it.
43. If at all possible get a plat map. If one isn’t to be had to ask the owner to attract one to the first-class of his know-how and find any cleanouts, shutoffs, and so forth. This is crucial to have in case of line breaks and different emergencies in the future. The seller might not be round to help.
Forty-four. Does the park have good enough device to perform? If the modern-day owner has a pickup, tractor, mower, ensure to negotiate for this as it will are available on hand within the future and you do not need to ought to start shopping for all of this the month you are taking over. It is a good idea to get a listing of all the elements and equipment presently being used to operate the park and have it blanketed in the acquisition.
Forty-five. Market Survey: Find out what different parks are charging and what it consists of, discover their vacancies, flow in incentives, reputations, and so forth.
Compare the expenses of renting unmarried own family residences(SFR’s), Apartments, Duplexes, with the fee of purchasing a cell home and paying lot lease.
What does an SFR of similar size sell for in the location? What are the payments on shopping for an SFR and shopping for an MH and paying lot lease?
Also, find out what other parks regulations can be for the age and styles of homes. It may be that your park will fill the area of interest of getting best more modern homes or the older homes.
46. Visit the making plans branch to look if there are any new parks which can be going to be built as well as the area of any vacant land zoned for cell domestic parks improvement.
Forty-seven. If you’re going to buy the park and inside the method purchase houses to hire or sell, you would possibly want to the region a few teaser commercials inside the neighborhood newspapers to peer what form of response you get. If you do not get any calls it can be a very good indication of the marketplace and the feasibility of filling the park up.
48. Find out the eviction legal guidelines. What is involved in the manner: time frame, paperwork required, and so forth. Also, test with different park proprietors/managers in the vicinity to peer what their enjoy is.
Forty-nine. Zoning: can houses be placed anywhere within the county which creates big competition. What age ought to a home be to be moved right into a county, and what are the other restrictions on homes being moved in, bought, and many others.
50. Also, if a city has prolonged or goes to extend utilities for your vicinity are you required to hook on and if so at what value?
51. Get in touch with the local corporations as they may be a great source of facts: police, planning, engineering, software, and constructing departments.
52. Removing abandoned homes – bear in mind making vendor pay for this – at the least find out what it will value and what options you need to eliminate the deserted houses.
53. If the park you are buying has condo units or hire-to-personal devices, make each attempt to test those out. You will not most effective see how the gadgets are being looked after by the citizens, you’ll also get a demonstration of the way the modern owner runs his commercial enterprise. If you locate holes or tender spots in the ground or walls, terrible carpeting jobs and such, this could be an illustration that the proprietor is not only doing brief fixes at the homes but additionally in the park preservation as nicely.