First Time Mobile Home Park purchase- what to look for?
EDIT-
I formally apologize for this garbage fire of a CRE post. I acknowledge I know next to nothing and after doing research the last few days I’m highly impressed with how much patience and value you have shown me as a beginner who jumped in here out of left field with no context or forethought and with stupid ideas and musings that I thought were “good”.  

I’m happy to report that with all of your help, I’ve been able to make the jump from unconsciously incompetent to consciously incompetent. 
My limitations abound, and I’m excited for the long term journey and learning. Thank you everyone for sharing this far. I’ll keep this post up for anyone else to potentially see and learn how NOT to introduce a deal or themselves. 
Original post as follows-

So, my brother and I are looking to enter into the commercial real estate market In California this year. I've found some interesting prospects that we are going to look at this weekend. I would love to get your advice on what things to look for and what to be aware of when shopping mobile home parks specifically. 

My thoughts so far: I'd like to check with the county/city and see about the history of the property and if there's been any historical issues including permits/tenants/HCD license, as well as talk to tenants and call up competing parks to hear what they have to say. 

I'm also curious about creative seller financing. My brother and I make decent income- combined probably around 100,000 + a year total- and we have some inheritance/investment money coming in this year. However, that being said- we don't have any large savings at the moment due to investing in other ventures. We can pull together probably about 20 K in the next three months if we focus and put in extra hours. I would love to know what are some creative suggestions or ways to get the seller to carry or what we can Stretch an FHA loan to cover. The properties we are looking at are in the 900,000-1.5 M range. I'm also interested to know if we can hope to close at a lower price than asking or if it's rare to get anything under what the market listing is. 

It's looking like the purported cap rates on the properties we are looking at are in the 7-10 range with an excellent cash flow. I'm also very interested in that both parks are on well water which lowers our expenditures and we can make some extra money from the utilities paid by tenants. One park 

One of the properties does have a HCD license suspension due to sewer system issues which is preventing the owners from collecting income- obviously a bad sign- however, my brother and I come from a family business of landscape contracting and have the equipment and experience of installing and working on septic systems in the past- we are hoping that this issue might be something we can fix ourselves and be able to get into the property for a good deal. One property has exclusively tenant owned homes and the other one is split with half owners and half renters. We're looking at close to 20 spaces apiece. One property has available space for potentially extending the park to include more lots, or create a campground seeing as the property is on the edge of an open space recreational area. 

Some facts on general location:

Both cities have decent Industries that are government subsidized between manufacturing and agricultural and one has a significant military base very near by. The population growth in both cities has grown steadily and then declined slightly over the past five years but nothing substantial- about 1% or less.

Any other advice for first time buyers is more than welcome. We are extremely weary and happy to walk away from any deals that don't make sense or are too risky. We view this as more of an exercise and practice, but if there turns out to be a screaming deal, I'm more than happy to do everything possible I can to land it- bringing in investors, seller financing, or bank negotiations- I can find a way. 

If you have any questions I need to ask of the seller, feel free to share those too.

I'm excited to hear your thoughts! 

&amp;#x200B;

\-K
[{"id": "hz5gx3f", "text": "Buy existing off market. Inspect all utilities.", "replies": [], "depth": 1}, {"id": "hz5hleq", "text": "The infrastructure in older parks is extremely expensive to upgrade/maintain. Even with your experience in a \u201clandscaping\u201d company, it\u2019s still way more expensive than you expect. Trenching is just part of it. Make sure you check the electrical amperage at each pad. Newer homes need 100 or 125A. Most older parks for permanent homes have 50A. \n\nHCD has an extremely long rule book that governs CA parks and if the residents know their rights they will be up your ass to fix everything continually. That one w the sewer issue should be an immediate pass. \n\nAlso financing for MHPs is more complicated than you think. If there are any park owned homes, you likely won\u2019t be able to get them financed even if they are producing income. You will need a sizable down payment or full seller carry back loan to close on the acquisition. For a stabilized park, there isn\u2019t much reason for a seller to consider this since other buyers have the cash. \n\n3rd party management in my prior experience also isn\u2019t great for this industry. There aren\u2019t many companies and performance (rent collection, upkeep, bills paid on time) is largely dependent on the individual manager you put in place/trust. self managing is difficult unless you\u2019re willing to live on site. \n\nValue add opps are raising rents (be careful about rent control laws that are applied differently to MHPs than apartments), then rehabbing abandoned homes old owners have left. Or you can bring in and selling new homes where you carry the debt to sub prime tenants. \n\nBe careful of transient RV parks where owners don\u2019t live there constantly as they can be very seasonal revenues.", "replies": [], "depth": 1}, {"id": "hz6eppd", "text": "paging u/lordashon", "replies": [{"id": "hz6uq50", "text": "Heh, I saw this last night right before I was going to bed, thanks for the reminder to come back to it.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hz6hd9t", "text": "I think this is rife with red flags. $100k combined income is not decent in California. Where do you live? Merced?\n\nWhat type of reserve funds do you have? Honestly I don\u2019t think you can close or support the cash needs of a MHP at a 10 cap. \n\nTry to focus on your day job and make/save more money. My $0.02", "replies": [], "depth": 1}, {"id": "hz6zzxt", "text": "u/HappyGhost13 covered most of the reply in broad strokes, and honestly I didn't have a lot more to add when I saw this post last night.  But since the preeminent u/German_Mafia tagged me I'll add my thoughts.\n\nThere's a lot here to dissemble I'll try to take it point by point.  I've looked at a couple of MHP in California, and honestly there is enough California money in the niche that if these were even close to being good deals they would have been purchased already.  So you are likely looking at situations that have big problems that can have big paydays if you solve them.  \n\n&amp;#x200B;\n\n&gt;as well as talk to tenants \n\nIf you do not have explicit permission to be talking to tenants, you should not talk to tenants, often tenants are the very last to know that a sale is happening.  They can and will make the sale more difficult, and the seller will be pissed.  In California in specific there are too many resources that can jump out and cause a sale to collapse.\n\n&amp;#x200B;\n\n&gt;and call up competing parks to hear what they have to say.\n\nI'm not sure what you are trying to have them tell you? I'll drive a park, but I've never called the neighboring parks to talk to them about my subject park.\n\n&amp;#x200B;\n\n&gt;we don't have any large savings at the moment due to investing in other ventures. We can pull together probably about 20 K in the next three months if we focus and put in extra hours.\n\n20k, isn't enough liquidity to be able to weather any emergencies that could come up during the ownership of the property.  This is a huge red flag that you aren't ready to purchase.  I had 100k to start with my first one and burned through that in the first 6 months.\n\n&amp;#x200B;\n\n&gt;I would love to know what are some creative suggestions or ways to get the seller to carry or what we can Stretch an FHA loan to cover. \n\nAsk. MHP owners typically are pretty well versed in different seller financing options because we often have to be able to sell out homes that way.\n\n***I'll go on a tangent here:*** *The only likely scenario here for you is to offer the sellers to take over management of the park, and to do a lease-option to purchase with a fairly hefty option payment. You'd offer to purchase for List Price + x% appreciation a year for the next 5 years,* \n\n&amp;#x200B;\n\n&gt;The properties we are looking at are in the 900,000-1.5 M range. I'm also interested to know if we can hope to close at a lower price than asking or if it's rare to get anything under what the market listing is.\n\nIf it's priced right, no you won't get any adjustments but if there are major capital expenses or they seller is just simply unrealistic it's very possible to get price reductions.  It's part of the negotiations.  I offered on one that was listed at 1.5M and after Due Diligence, and the massive capex spending I would've needed I adjusted my price to 600k.  The sellers laughed at me.  The park 4 years later is still on the market.\n\n&amp;#x200B;\n\n&gt;I'm also very interested in that both parks are on well water which lowers our expenditures and we can make some extra money from the utilities paid by tenants.\n\nWells rarely lower your OpEx. Drilling a new deep enough, fast enough and safe enough well can cost upwards of 100k for a property like this.  If the well goes bad, you will need pretty expensive filtration/storage/pump systems.  And you can rarely charge more for well water than the actual cost to pump it + a reasonable capex reserve, typically dictated by state law.\n\n&amp;#x200B;\n\n&gt;One of the properties does have a HCD license suspension due to sewer system issues which is preventing the owners from collecting income- obviously a bad sign- however, my brother and I come from a family business of landscape contracting and have the equipment and experience of installing and working on septic systems in the past- we are hoping that this issue might be something we can fix ourselves and be able to get into the property for a good deal.\n\nYou don't have enough money to purchase the system.  Being able to scrape together 20k in the next 3 months, isn't enough to even just buy a new tank. Let alone pay for permits, site surveys, soil testing, potential permits for having to move homes etc.... Having free labor goes a long ways but there are many other costs involved.\n\n&amp;#x200B;\n\n&gt;One property has exclusively tenant owned homes and the other one is split with half owners and half renters. \n\nThis doesn't really matter since you need to purchase with seller financing.  In fact the one with rentals is probably more attractive to you with seller financing than the one without.  The seller will know that someone either has to pay cash, have a bigger DP, or require SF to purchase because banks are wary to lend on MH rental parks (though this is changing)\n\n&amp;#x200B;\n\n&gt;We're looking at close to 20 spaces apiece. \n\nToo small for any kind of Property Management, or even a PT park manager.  You will either need to live close to be able to manage the park, or reduce or give free rent to someone who is both trustworthy and handy in the park to collect rent, deal with tenants, keep everyone happy.\n\n&amp;#x200B;\n\n&gt;One property has available space for potentially extending the park to include more lots\n\nAdding pads can cost upwards of 20k/pad depending on the infrastructure and doesn't include the cost of the new home.\n\n&amp;#x200B;\n\n&gt;, or create a campground seeing as the property is on the edge of an open space recreational area.\n\nTurning it into a camp ground means someone has to be onsite every day.  One of you will have to live on site.\n\n&amp;#x200B;\n\n&gt;Any other advice for first time buyers is more than welcome.\n\nYou didn't talk about any of the important information, you made a very long post asking for advice, but didn't actually give very many numbers.  Deals always start with digesting the numbers before there is any physical due diligence. If the numbers are off it's not worth the time.  The fact that you haven't shared numbers is a big red flag to me.  It indicates a couple of things to me, any of which are a red flag.\n\n1. You don't have the numbers\n2. You don't understand the numbers\n3. The numbers aren't available, and it's all pie in the sky listings by a terrible broker\n4. You are excited over a possibility and haven't slowed down enough to run the numbers\n5. You aren't ready to be invested in commercial real estate\n6. You think you can solve any problem trading physical labor for currency", "replies": [{"id": "hz82n04", "text": "Wow. Thank you for this! Quite a comprehensive answer and I\u2019m going to have to look deeply into what I\u2019m lacking and how to better prepare myself. I am beginning to comprehend how completely unprepared and lacking in knowledge I am. I\u2019m stunned by how confidently ignorant I was. \n\nI am very grateful I asked here- I\u2019m getting sound advice from people like you who know what they are doing and actually talking about. \n\nLots of red flags here and I\u2019m learning to understand what, why and how. \n\nVery humbling and a solid reality check- thank you. \nI\u2019m starting to learn how important numbers are. \n\nHere\u2019s some numbers: \n\nThe coastal park:\n 25 Units Offered at $1,450,000 \nThe Posting advertises a 8.91% Cap Rate\nAnnual gross income: \t$207,001\nAnnual vacancy loss: \t$6,210\nAnnual Net Operating Income:\t$129,248\n1.46 acres \nParking ratio: 1.08 per 1000 sq ft \n\nLand Assessment\n$788,102 (2021)\nImprovements Assessment\n$260,720 (2021)\nTotal Assessment\n$1,048,822 (2021)\nZoning code: TPD\n\nSecond inland park:\n20 United offered at $1,150,000\n11.6% cap rate \nAnnual gross income: $236,329\nAnnual Operating expense: $103,031\nNet operating income: $133,298\n19 acres \nWell water, and septic\n12 park owned homes with an average rent of 559 for park owned homes.\n100% occupancy \n\nThank you for the opportunity to learn! And if I\u2019m doing a poor job Of sharing number or missing something, feel free to let me know. I\u2019m grateful to be a part of this community and to contribute what I Can information wise.", "replies": [{"id": "hzpt0tc", "text": "Sorry it's been a couple of days. If you scroll back in my post history you can see the posts I've don't about my park.  \n\n[Specifically this post here where I evaluated a park](https://www.reddit.com/r/realestateinvesting/comments/iji4u3/mobile_home_park_evaluation_process/)", "replies": [{"id": "hzvk3gg", "text": "Thank you! Your post is incredibly valuable and pertinent. I looked at the Property and am waiting on march\u2019s collections numbers currently. I\u2019ll update on more accurate details and numbers soon.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hz7r2gp", "text": "You are gonna want to do a minimum of 7% cap rate on toh park and 10%+ poh parks only buy parks with city water and sewer fha will not finance a mobile home park and most banks don\u2019t either your gonna need at least 250k to get into a 1 million dollar property and you would probably be better off buying a park not in California is not landlord friendly the southeast is a lot better and try not to pay more than 45k a pad", "replies": [], "depth": 1}, {"id": "hz7tae4", "text": "Have a plumber and electrician on speed dial. If you don\u2019t own a mobile home dealership go talk to the local ones and ask about buying their trade ins/advertise rental lots.", "replies": [], "depth": 1}]