Mobile Home Parks: How To Dispose of Ancillary Assets
Mobile home parks sometimes come with the strangest assets. I have wound up as the owner of everything ranging from used car lots to commercial laundries, and from apartments to single-family homes. How does this happen? Since most mobile home parks are fairly old, the original owner sometimes had additional businesses for rental properties that he owned in his heyday. And when you buy the park, you get the whole works.
What is the asset worth?
The first question to ask is "what is this asset worth, if separated from the park?" This is often a tricky question, because the proximity to the park can be extremely damaging to values, particularly with single-family homes. Nobody really wants to live next door to a mobile home park. I generally use a rule of 50% of market value for a property not adjacent to a mobile home park. Commercial properties, however, do not seem to suffer from the same stigma. I have normally received a price commensurate with properties that have no geographic location near to a mobile home park.
What is the economic impact of selling the asset as opposed to renting it?
The answer to this question almost always points to selling the asset. To truly analyze the income from renting, it is important to include all the costs associated with owning the asset, which includes repair & maintenance, property tax, insurance and, of course, operating costs. I once had a used car lot that was using as much in repair and maintenance as the gross rent. Much of that cost was buried in the mobile home park pro-forma, but it was really the used car lot's problem.
Can you obtain a partial release from the lender?
Even if it is to your advantage to sell the asset, you will not be able to convey title unless the lender is willing to give a partial release of this portion of the property. And the time to ask is now, not once you have begun the process to separate it. In most cases, the lender is often happy to release the portion for the proceeds; it is normally hard to have the lender accept anything less than 100% of the amount you receive.
Begin the process of subdividing the property
If you have permission from the bank, then it is time to begin the process or separating the asset from the park. This step is generally called "subdividing the property"or making it into two separate pieces. This will require city approval, and you will have to have a survey done of the area to be carved out, as well as go before the planning and zoning commission and often the city council.
You may also have to work out such issues as ingress and egress, especially if you will have to share a common entrance and road with the park.
List the asset for sale
In most cases, utilizing a specialist broker to list and sell your asset is money well spent. Sure, you can put up your own sign � but do you really have the qualifications to negotiate price or speak with buyers such a specialized item in a market you don't know that well. When I went to sell the 8-plex apartment complex that came with a park in Shreveport, I enlisted the aid of a real estate broker that specialized in multi-family in Shreveport. As a result, I found a buyer quickly and at a much higher price than I could have ever obtained.
Close on the sale
When you get offers, remember that you are selling an asset that is next to a mobile home park. It is not a time to get proud and have visions of grandeur. Take the first reasonable offer and run with it. Since the offers and interest tends to want after the initial listing of the asset on the market, it is important to treat every offer seriously.
Trimming off and selling all non-mobile home park assets is just good business. If you follow this road map, you should have no problem in maximizing your park's value through converting such assets to cash.