There is no doubt that more and more people are choosing to live a minimalist life driven by the increasing cost of the housing market. If you ever thought of buying land for housing development, a mobile home park can be a profitable way to go, and an easier option to start.
A mobile home park can be a great investment not only because you are receiving monthly income through lot rents, but you are also not losing any part of your land.
Running a mobile home park can be a lifetime business opportunity for you and your family’s future generations. If you are searching the web for details on how to start a mobile home park, continue reading as we put together this guide on how to build a mobile home park.
As mentioned, mobile home parks are making a continuous income stream but starting from scratch can be costly and challenging.
What Is A Mobile Home Park
According to the Mobile Home Park Home Owners Allegiance, there are more than 45,600 mobile home parks in the US, and more than 5,500 of these are located in the state of Florida. The Financial Times reports that about 22 million Americans are living in mobile homes. This trend is largely due to rising housing prices.
The average wage earner cannot afford a median-priced stick-built house. Even renters may spend a third of their income on housing alone leaving them without limited living options financially. Considering these facts, it is understandable why many Americans are looking to live in mobile homes. Mobile homeowners can simply rent the land where their mobile homes are set up. These lot rents are always significantly lower than renting a traditional apartment building or single-family house.
A mobile home park is a place where mobile homes are set up. While most mobile home parks are privately owned by either single owners or corporations, there are also parks that are owned by their residents. These parks are called Resident Owned Mobile Home Parks where residents own shares of stocks of the park and not really the land where their mobile homes are set up.
A mobile home park can also be leased land or owned land. In a lease land mobile home park, the park is privately owned and the homeowners are paying monthly lot rentals. In an owned land mobile home park, mobile homeowners own a piece of the park while paying a very small amount on utilities, park maintenance, and upkeep.
12 Necessary Steps To Start A Mobile Home Park
1. Choose the Name for Your Mobile Home Park
Choosing a business name is the number one challenge many business owners have to deal with when starting a business. Although it may sound simple, the fact is, it’s not. You have to check everything to make sure your mobile home park’s name is unique or you may run into trouble with plagiarism and trademark issues later on.
Make sure your chosen name is available. Check all trademark and business registration databases in your state and in the country. Also, check if the business name’s domain is available. If you choose a longer name, you can be more creative with the domain.
Make the name simple and easy to remember. The best mobile home parks’ names are those that are short, unique, and easy to remember.
Consider the marketing aspect. Make sure your selected domain is easy to advertise or can be branded.
2. Create a Mobile Home Park Business Plan
Starting a business of any kind requires a solid business plan. Your business plan should reflect how you fully understand the housing market and your business strategy. Your business plan should focus on the following:
- Location plan of the mobile home park and its surrounding areas.
- An executive summary that summarizes your entire business plan with key details.
- Company overview that tells the reader about the history and origin of your mobile home park, and what type of park (leased-land or residents owned, RV park, campground, or a mobile home resort). Some popular mobile home park types you may choose from include
- Land-Lease Communities
- Resident-Owned Communities
- Mobile Home Park Chains
- Investors as Owners
- Budget Communities
- Family-Focused Communities
- Retirement/55+ Communities
- Luxury Communities
- Specialty Communities
- An Industry analysis that documents information about the market size, competition, and future possibilities like market trends.
- A marketing plan that determines your product, price, promotions, and advertising plans.
- Operation plans that detail your process of running the park on a day-to-day basis, including park maintenance and amenities.
- A management plan that details the background and experience of your park’s management team. If you are planning to run the park by yourself as the manager, you still need to plan.
- A financial plan is very important. How much money do you need as capital? How many employees are you going to hire and how much are you going to pay them? What is your projected collection each month, each year, and in the next two to three years? What is the source of your money? Do you need to raise funds or do you have enough savings to finance this business?
3. Create the Legal Structure of Your Mobile Home Park
Choosing a legal structure includes registering the name of your mobile home park with the Secretary of State where your planned mobile home park is located. Choose between the following legal structures:
- Sole proprietorship – if you are the sole owner
- Partnerships – if you have one, two, or more business partners
- Limited Liability Company (LLC). An LLC is very popular among small business owners. This means that when something wrong happens with the business in the future, as the owner, you have limited liability. In the event that the company goes bankrupt, your personal finances as the owner will not be affected.
- S Corporation. Similar to LLC but with a different taxation system. Owners can pass their business income through their personal income tax returns to avoid double taxation.
4. Secure Your Startup Funding (if needed)
If you have enough savings and want to use the money, then go for it. But if you want to raise funds through loans, crowdfunding, families, friends, and even angel investors, you may consider giving some of them equity.
5. Register Your Mobile Home Park with The IRS
Registering with the IRS is only needed if you need to hire employees as you will be provided with an Employer Identification Number (EIN). If you are a sole proprietor and plan to run the park by yourself you use your social security number to pay your taxes.
6. You Need a Business Bank Account
Your mobile home park’s revenue must be deposited to its own bank account and not your personal savings account.
7. Get a Business Credit Card and Business Cards
Similar to its own bank account, your mobile home park must also have its own credit card.
Although everyone has a phone and business cards may sound obsolete to some people, business cards are still very important.
8. Secure the Required Business Permits and Licenses
These documents vary from state to state and city to city. Ask your local government for the specific requirements and documents needed. You may also need a zoning permit, special use permit, and a manufactured home installation permit.
9. Get Business Insurance for Your Mobile Home Park
The type of business insurance you may need for your mobile home park may depend on your scope of business operations. You may consider taking a look at some of the most common business insurance policies:
- General liability insurance – covers all accidents inside your mobile home park.
- Workers’ compensation insurance – covers you and your employee’s accidents.
- Commercial property insurance – covers property damage caused by natural disasters, theft, or vandalism.
- Business interruption insurance – covers lost business income due to unforeseen reasons.
- Professional liability insurance – protects your mobile home park business against claims of professional negligence
10. Buy or Lease Mobile Home Park Tools and Equipment
A successful mobile home park operation needs reliable equipment. These pieces of equipment may include but are not limited to
- Lawnmower or tractor for mowing and landscaping
- Chainsaws for cutting and trimming tree branches (if there are trees inside the park)
- A dump truck or garbage truck for trash collection
- Pressure washer for exterior cleanup
- Bolt cutters for tenants abandoning things that are padlocked
- Shovel for dozens of reasons
- Ladder for retrieving something from the roof or clearing tree branches that are out of reach
- Golf cart for fast and easy access around the mobile home park
11. Develop Your Marketing Materials
Marketing for any business is the most important part of the startup. For a mobile home park business, these are essentials in attracting mobile homeowners.
- Logo. Creating a logo is as challenging as choosing a business name. You can hire some freelancers at Freelancer.com to create a number of logos for you to choose from. You can open an auction project there to lower the cost and pay only for the logos that you like.
- Website. In today’s high-tech environment, a new business without a website will always be left behind the competition. Your website must include all the details mobile homeowners want to know like the lists of amenities and features of the park, lot rent cost and what services are associated with it, park policies, and manager with contact details. Having professional photographs as drone shots could also help attract more mobile home buyers.
- Social Media Accounts. People use social media to find almost everything and social media is extremely important in marketing your mobile home park. It is also easier to post on social media than on your business’s official website. Sometimes, a post can go viral and can attract more buyers. Your social media accounts may include Facebook, Instagram, YouTube, and LinkedIn. Videos on YouTube tend to be more effective in promoting a business like a mobile home park as people always want to see beautiful landscapes.
12. Open Your Mobile Home Park for Business
If you followed the above steps, you should now be ready to open your mobile home park business. During the first few months of running your business, you must focus heavily on social media marketing.
Some Things To Consider When Planning To Start A Mobile Home Park
Although mobile home parks are widely profitable, it also carries some risk. Mobile home park investments are still seen as riskier than traditional real estate developments. Here are some things you might consider when planning to start a mobile home park business.
- You May Struggle to Get Traditional Funding
Although banks are fast to lend money to real estate developers, this can be difficult if you apply for a loan for your mobile home park business. There are other ways, however, to finance your business like seller financing, investment funds, or hard cash but these are riskier than bank loans. You must exercise caution when looking to finance your mobile home park business.
- The Amount Of Work Needed
Developing land requires lots of work especially if you hire inexperienced workers. Running a park is easy but building one from scratch is a whole different level. You must analyze everything and put it on your business plan.
Building a mobile home park from scratch is not too hard because it has a relatively low barrier to entry. All you need is some land, zoning approval, and experienced landscape people. Opening a mobile home park is more straightforward than opening a real estate subdivision. The most significant hurdle is the price of the land and planning.
You don’t have to be a real estate expert to start a mobile home park. With proper research, planning, and market analysis, you can start a mobile home park even without experience as long as the needed financial capabilities.
Having said that, running a mobile home park business is highly profitable but careful and intrinsic planning is needed before letting your hard-earned money go.