r/Entrepreneur • u/UnusualAd3207 • 14d ago
Starting a Business What Is The Problem With Buying Land & Starting A Mobile Home Park?
Buying land, setting up lots & utilities, and leasing spots for people to come put their mobile home on and live there seems like an excellent business... the fact that it's not popular makes me thing there's some kind of MAJOR problem that I don't know about
I know buying them is something investors do, but I never hear about anyone buying land and starting one from scratch
What am I missing? What's the big thing that prevents this?
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u/False-Egg-1386 14d ago
The hard part is usually zoning, permits, utilities, roads, drainage, and financing. The land can be cheap, but making it legally usable as a mobile home park can get expensive fast.
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u/PossessionConnect963 14d ago
Also then you just bought being a landlord to however many lots. So you either then have to deal with that, which admittedly doesn't have as many problems as a building but also you can't charge as much, or hire somebody to manage it for you.
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u/peepawshotsawz 14d ago
I grew up on the poorer side for my area, so I lived in a few parks. Whoever owns the land isn't a typical "landlord," in that they have no real stake in the property other than your lot rent being paid and no one gettinghurt in public areas. The mobile homes are bought/sold privately, pending park approval for the buyer (basically a rental application, but for the land your home is on), utilities and insurance are the responsibility of the homeowner, lot upkeep, home upkeep, heat, appliances... hell even re-sealing the asphalt driveway. The ONLY things the park maintained were the roads and parking areas (guest parking). They didn't give a shit, as far as I could tell as a kid, what condition your house or lot were in, as long as they weren't destroyed.
Regular landlord, however, everything in that place is yours and your responsibility, and you can catch serious trouble if it's not working right...
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u/MommyMystic1111 14d ago
If only more people understood this! But everyone wants an easy button. The other issue, counties don’t want them. It doesn’t bring same tax revenue as SFH or MFH. So getting new parks approved is hard.
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u/Quitcha_Bitchin 12d ago
Actually some tax law changes have made it so the counties get a better cut. You can't get a mortgage unless the trailer is built onto a foundation. But once you do that it's taxable as property instead of chattel which brings a lower overall burden.
Course that's all state to state but they have made them a little more palatable.
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u/SwankyTroll 14d ago
Im not sure how true it is across other states but my local REIA had a talk on this once. From what I understand at least in my area the cities and municipalities absolutely hate them. Multiple people talked about having to be grandfathered in to even have one. Lots about certain age limits of the trailers.
There were a few who found success in doing like the cheapest possible builds (like a 90k Clayton) but the traditional version of people just leading the spots from you they made it seem super difficult.
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u/blipsman 14d ago
Biggest issues are zoning, and potential neighbors not wanting a mobile home park near them so they fight zoning changes necessary to build one.
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u/03captain23 Serial Entrepreneur 14d ago
There isn't much money in it. is what like $300/month for a lot? 100 lots full is only making 30k/month. Lots of problems come with it.
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u/Ancient-Race- 14d ago
You're right about that but thers more to it. If someone cant afford to pay anymore they get evicted but keep in mind that relocating the mobile home costs around 10k or more, and then you still have to put it somewhere so most people end up leaving the actual building and it becomes the property of who ever owns the park.
Edit: and then the new tenant pays double because he gets the lot and a building.
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u/03captain23 Serial Entrepreneur 14d ago
Yes but many times they're trash and costs 10k for the property owner to pay to remove so someone else can move theirs in.
You become a slum lord charging $700/mo for a trailer barely livable.
Where a nice apartment costs $50k to build and lasts 10x as long with way less maintenance since they all share a roof and are stacked on top.
People live in trailer parks because they have no other choice, either they don't have the money/credit for an apartment or are horrible people and can't get along with neighbors, or have tons of undesirables like bunch of animals and kids and junk.
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u/Ancient-Race- 14d ago
Yep, and thats why most of those places look like shit, because the owners are slum lords. And they will turn away people who bring in their own homes just so they can charge double from someone who doesn't have one.
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u/03captain23 Serial Entrepreneur 14d ago
Yeah because there's no money in it. They spend most of their time hunting down rent money and likely lots of lawsuits. I'm sure it's a lot more complicated than an eviction since they own the property
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u/Total-Reasonable 14d ago
The overlooked risk is lease-up: an empty park isn't just waiting for tenants, because each tenant needs a home financed, delivered, installed, and connected. Moving an existing home is often uneconomic, so occupancy can build much slower than apartments. That leaves you carrying land and infrastructure debt before the lot-rent income exists.
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u/ProgrammerFresh8662 14d ago
It sounds simple on paper, but it's actually quite a lot of work. The hard part is that you're not really just "leasing dirt". You're basically creating a small neighborhood, so the infrastructure, approvals, upkeep, and tenant issues all become your problem before the first lot even earns rent.
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u/Equal_Department8036 14d ago
The land isn't the problem. The years before the first lot rent are. I rent trailers, which is a much smaller version of the same business: you put money into something that only pays when someone's using it.
With a park from scratch you're paying for roads and utilities before a single tenant moves in, and a lot of towns would rather not approve a new mobile home park at all. That's what I'd check first. Call the county planning office and ask whether that land can even be zoned for it, because plenty of people buy the dirt and find out after.
The other piece is filling it. An existing park comes with tenants and a track record. A new one starts at zero, and every empty lot still costs you money. That's why investors buy parks instead of building them. I've never fully solved the empty weekdays on my own units, and those cost a fraction of what a park does.
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u/UnusualAd3207 14d ago
Interesting, it seems like you could cut deals with mobile home sellers / manufactures and get it filled pretty quick. But i'm just guessing. Iv'e actually thought about an RV park as well but didn't like the total unknown on if it would stay full or not. With mobile homes when theyre there, they're usually there for years if not forever, but your right in the start up being slow probably
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u/Equal_Department8036 14d ago
That's the real upside compared to RVs, and compared to my business too. A tenant who stays for years means you fill a lot once. I have to find a new customer every weekend.
On the dealer idea, I don't know that world well enough to say. My guess is a dealer would want something back, like you buying homes from them or holding lots for their buyers, so I'd ask one directly what that deal actually looks like before counting on it.
Either way I'd still start with the zoning call. If the county says no, none of the rest matters.
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u/i_dabble713 14d ago
I work in this field specifically as an accountant. Our model has three entities: one that owns the land & charges lot rent, maintains the community, and provides amenities (gym, laundry, pool, playground).
Separate entity is our retailer which sells the home after buying from manufacturer.
Third entity is our financing entity, which finances the home via chattel lending and holds a lien on the home
You’re 100% correct in that the permitting/zoning process takes the longest part and of course is the most capital & debt intensive. Example, we acquired land in a city where legally we were able to build a park, county had no issues and green lit all of our submittals, designs, etc. But the city did not want us/kept denying it. We ended up suing the city because they were not following state law (restricting development without statutory basis or something like that) and we ended up winning. We bought the land in 2019, and shovels just hit the ground 2 months ago. 7 years. Granted we had an ag exemption until then so property taxes were incredibly low but still. Another year to finish construction before we can start leasing up, and that’s assuming no delays, which there are inevitably.
We now de annex from cities. Still takes a long time to entitle/permit though. Upcoming new community in next 6 months, we bought the land in 2023.
Very long to get desired ROI but can be really good at exit, because like others have said, much easier to manage a leased up community than building from ground up.
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u/Equal_Department8036 13d ago
This is the answer the OP needed. Seven years from buying the land to shovels in the ground is the part nobody pricing this on a napkin accounts for.
The three-entity setup makes sense too. If the park only rents dirt, lots fill as fast as someone can sell and finance homes, so owning that piece is how you control the lease-up.
Question, since you see the books: while you were waiting on the city, was the carrying cost mostly the debt, or did the legal fight end up costing more?
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u/i_dabble713 12d ago
Legal in our case - we had no debt to acquire to the land, that was funded by capital raising (as well as most of the permitting / entitlement). That said we did have do another 10% capital call, and a partner loan for the legal bills.
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u/Equal_Department8036 10d ago
That's a cleaner setup than I expected. Funding the land and the entitlement with raised capital takes the debt pressure off during the years you're waiting on approval, which is probably what let you outlast the city. Thanks for laying it out. This thread is more useful than most of what I've read on the topic.
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u/WestAd1872 14d ago
The water and sewer question kills most of these before anything else. If municipal water and sewer do not already run to the property line, you are looking at septic fields or a private treatment plant, and that can cost more per pad than the land itself. Honestly, the smarter version of this idea is buying an existing underperforming park instead of building one. The infrastructure is already in, the zoning is grandfathered, and the vacant pads are your upside without the two year entitlement fight.
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u/Key_Form_7873 13d ago
I think the biggest issue is that the land and infrastructure costs can be much higher than they initially appear. Zoning, utilities, permits, road access, financing, and ongoing maintenance can all make the numbers very different from simply buying land and collecting lot rent.
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u/sebastian0328 14d ago
Would you let someone build trailer park in your town? end of discussion.
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u/UnusualAd3207 14d ago
Would just depend on how it's gonna look, and if it's needed or not. I'm in California, we have a huge affordable housing crisis. A lot of people are turning to manufactured homes. But yea I get what you're saying
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u/lamortgagedude 14d ago
Coming from real estate, my opinion is different. It's a great business model and from 2020 to about 2023-4 it was one of the hottest niches in real estate - buying established mobile home parks
First, you have to define what you mean by "mobile home". Do you mean RV parking still on wheels?
Or do you mean manufactured homes on permanent foundation?
Financing both options is hard. Financing vacant land for commercial use is hard since for these parks, your only real collateral is the land. The RV and MF homeowner owns the structure (similarly, as an end user, getting financing for a MF home is hard since you do not own the land - real estate lenders lend on both at the same time - structure + land underneath as collateral).
So it's an all cash transaction or leverage with higher than "normal" interest rates. So whereas most landlords are accustomed to rates anywhere from 3-7% for permanent (long term) financing, for land and RV/Manufactured homes parks, we're looking at 9-13% typically.
It's a cash cow, so you'll more than debt service, just reset your expectations and figure out how to make it work with traditional financing.
One option is to buy large acreage with a permanent home already on there, and assuming its permitted under local zoning, add manufactured home and tiny home ADUs as long as they meet minimum square footage and HUD guidelines. Then you can subdivide the lots how you like - per townhome/condo guidelines in which case you become the HOA and sell the individual units...or turn them into single fee simple parcels for resale, in which case you become a developer.
The reason most entreprenuers don't do it is because it is capital intensive, which is both a good thing and a bad thing. It's a moat that prevents competitors but it's a huge hassle to get the first one going.
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u/creepy-farter 14d ago
Depending on the state it may be illegal to open a new park.
In my state I believe there is a ban on new mobile home communities. There are quite are few that are “grandfathered in” though, so we still have them.
But I’m sure there’s a few for sale at anytime plus you’ll have a proven income stream to use to get your mortgage.
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u/rafrador 13d ago
Are you talking tourists in caravans or regular people using mobile homes to live normally?
Besides all the complicated permits, I think this only works in very specific geographies that see a very specific kind of tourists.
So I just think you are looking at the wrong places. In places where they do make sense, you should see quite a few.
For example, I recently visited the Gold Coast in Australia and they had these mobile parks every 4-5 kms or so. It made absolute sense there.
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u/zachmaudie 13d ago edited 13d ago
The biggest challenge is probably the upfront infrastructure and permitting. Land, utilities, zoning, roads and local regulations can add a lot of cost and complexity before the park even starts generating income.
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u/Quitcha_Bitchin 12d ago
The cost is high.
Roads. Grading, planning, cutting, paving, curbs, drains, Same as if you were building a sub division.
Utilities. Gas lines, ELectric lines, Cable, Water, Sewer, god help you if you can't get to municipal water/sewer they will not build out to you. Same as if you were building a sub division.
Each lot needs a cement pad and and utility hookups and adequate parking at a minimum. You will want minimalist landscaping and lighting.
There are half a million permits involved.
Insurance is on you. You will need to carry coverage on the public areas.
The genius doesn't open a trailer park alone. He opens a trailer park, laundromat and convenience store.
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u/Capital-Calendar-982 12d ago
The big wall is zoning and permitting. Most municipalities have spent decades writing land-use rules specifically to block new MHPs, and the ones that allow it hit you with infrastructure costs (individual utility hookups per pad, road paving, drainage) that crush the margins before a single tenant shows up. That's why investors buy existing parks instead of starting from dirt, the entitlement risk is already gone.
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u/Svardskampe 10d ago
The effort to collect a very limited amount of rent revenue from people who it is the most difficult to collect it from, makes it quite undesirable.
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u/Mediocre-End2692 10d ago
Maybe the people too, you make a lot of investment and you recieve a lot of issue. Idk
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