Welcome back to The Passive Mobile Home Park Investing Podcast with your host, Andrew Keel!
In this episode, Andrew Keel continues this insightful mini-series on some of the top risks involved with mobile home park investments. This time, the focus is on value-add mobile home park projects—particularly those with substantial infill and occupancy needs—and the heightened risks they present for passive investors and limited partners.
Andrew breaks down the key challenges infill-heavy projects pose, offering practical advice on budgeting, avoiding common pitfalls, and understanding critical infrastructure costs.
If you’re looking to invest into value-add infill mobile home parks, this episode is packed with actionable strategies to help you navigate these risks and make smarter decisions.
Key topics covered include:
Whether you’re a seasoned mobile home park investor or just starting your journey, Andrew Keel offers valuable insights to help you potentially minimize risk and boost returns.
Tune in now to gain the knowledge you need to enhance your mobile home park investment strategy!
***Andrew Keel and Keel Team Real Estate Investments (Keel Team, LLC) do not endorse any interviewee. This interview is for informational purposes only and should not be depended upon for investment purposes. ***
Andrew Keel is the owner of Keel Team, LLC, a Top 50 Owner of Manufactured Housing Communities with over 3,000 lots under management. His team currently manages over 40 manufactured housing communities across more than 10 states. His expertise is in turning around under-managed manufactured housing communities by utilizing proven systems to maximize the occupancy while reducing operating costs. He specializes in bringing in homes to fill vacant lots, implementing utility bill back programs, and improving overall management and operating efficiencies, all of which significantly boost the asset value and net operating income of the communities. Check out KeelTeam.com to learn more.
Andrew has been featured on some of the Top Podcasts in the manufactured housing space, click here to listen to his most recent interviews: https://www.keelteam.com/podcast-links. In order to successfully implement his management strategy, Andrew’s team usually moves on location during the first several months of ownership. Find out more about Andrew’s story at AndrewKeel.com.
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00:21 – Welcome to The Passive Mobile Home Park Investing Podcast with Andrew Keel
01:16 – Budgeting Tips and Common Mistakes for New Mobile Home Park Investors
05:21 – Managing Concrete Costs and Raising Misc Funds for Unforeseen Expenses
08:36 – Navigating Utility Hookups, Infrastructure Challenges, and Ground Shifting Issues
13:25 – Why Skirting is Crucial for Mobile Homes: Protecting Your Investment
15:29 – New vs. Used Mobile Homes: Pros, Cons, and What’s Best for Infill Projects
19:50 – How to Match Mobile Home Size to Lot Size for Optimal Results in Mobile Home Parks
21:53 – Understanding Execution Risks and Infill Strategy in Value-Add Mobile Home Parks
25:00 – Andrew’s First Mobile Home Park Deal: Insights on Funding, Liquidity, and Loans
27:19 – Partnering with Experienced Mobile Home Park Operators for Success
SUBSCRIBE TO PASSIVE MOBILE HOME PARK INVESTING PODCAST YOUTUBE CHANNEL https://www.youtube.com/channel/UCy9uI3KGQmFgABsr9lUtRTQ
00:21 – Welcome to The Passive Mobile Home Park Investing Podcast with Andrew Keel
01:16 – Budgeting Tips and Common Mistakes for New Mobile Home Park Investors
05:21 – Managing Concrete Costs and Raising Misc Funds for Unforeseen Expenses
08:36 – Navigating Utility Hookups, Infrastructure Challenges, and Ground Shifting Issues
13:25 – Why Skirting is Crucial for Mobile Homes: Protecting Your Investment
15:29 – New vs. Used Mobile Homes: Pros, Cons, and What’s Best for Infill Projects
19:50 – How to Match Mobile Home Size to Lot Size for Optimal Results in Mobile Home Parks
21:53 – Understanding Execution Risks and Infill Strategy in Value-Add Mobile Home Parks
25:00 – Andrew’s First Mobile Home Park Deal: Insights on Funding, Liquidity, and Loans
27:19 – Partnering with Experienced Mobile Home Park Operators for Success
Welcome to the Passive Mobile Home Investing Podcast. This is your host, Andrew Keel, and we have an awesome episode today. We’re going to continue our risk series and we’re going to talk about infill and why value-added mobile home park projects with lots of infill have more risk for passive investors or LPs looking to invest in these projects. I’m going to go through a few of those reasons.
Infill on looking at it from the outside in is like a no-brainer. There are vacant lots, you’re buying a park, say it’s a hundred lots and there are 70 occupied. You’re going to bring in 30 homes, and fill the vacancy. The revenue will go up. The income should go up and it should be a no-brainer.
Well, value add infill projects are notorious for being just a ton of work and we’re going to go into the specifics of why that leads to more risk.
Number one is going to be budgeting. It’s really, really, really tough to know exactly what it will cost until you’re in the trenches doing it. In due diligence, you can call contractors. You can get quotes on hooking up the plumbing, hooking up the electrical, things like that and that’s really a ballpark that they’re giving you. They’re not going to go to the property typically and walk out with the amount of wire it’s going to need and all of that. You’re kind of budgeting it and you obviously want to have like a miscellaneous fund so you have additional monies available to allocate here as needed.
Again, when you’re looking at a pro forma, it’s not hard and fast this is exactly what this is going to cost. Look at COVID all the material costs, like went up by 30% on everything because of all the issues with transport and things like that. Just know going in that if you’re looking at a pro forma and there’s a lot of infill on there and there’s not like a slash fund and there’s no extra capital available just in case fund, it could be tough. It could be tough if things don’t go exactly as planned.
Also when you’re doing this the first time or the second time, there are going to be mistakes. Myself included have made many mistakes and I’m going to go through a couple of those. Mistakes for those without experience are super common.
Number one, not raising enough money. Guilty. I did this on one of my first deals where we didn’t raise enough money and it put us in a bad spot where we had to slow down the infill and slow down what we had projected on our pro forma. That’s one. You have to raise enough money.
Hiring the wrong contractor is another one. If they’re not licensed to do the work you can’t just hire any installer. It has to be a licensed installer to get your permits approved and get your certificate of occupancy. That’s an issue.
Truck drivers. This is another big thing that unless you’ve been in it, you wouldn’t realize. But a lot of truck drivers can’t cross state lines when transporting a mobile home so what they’ll have to do is they’ll bring it to the state line and then drop the home off and another transporter will come and hook it up and drive it the rest of the way if it has to cross state lines. Just being aware that that’s a thing and there’s an additional cost for not just this transporter for, but for the other one as well is super important.
Then certain states require HUD inspectors. These are not your local building department inspectors. These are HUD inspectors that are at the federal level that will come in and inspect your new homes that have been installed. Just due diligence is so important to know and to really just know who to call. You call your local inspector. He may not know that there’s a HUD inspector going to be required if you bring in new mobile homes, because this may be the only mobile home park in town and it hasn’t sold in 30 years and they haven’t brought in any homes in a long time since he got the job four or five years ago. He’s never dealt with this before so he may not be able to direct you to all the people that are involved.
That’s where contacting your state manufactured housing association and other experienced operators that are in the vicinity is a great tool on the front end in due diligence. You need to fully understand the process, especially if this is your first mobile home park.
I think I’m talking today to those people who are looking at investing passively in a mobile home park with a new operator. There’s a lot of new operators in the space and this may be their first deal. Guess what? They need capital to put deals together. I needed capital on my first deal, but I feel like I got lucky, to be honest, on some of these mistakes. I had the wind at my back. Interest rates were low the last 10 years, obviously with real estate prices having just been going up.
We had some mistakes that we were able to work through. I’m going to go through a couple of those mistakes, but just know that when you’re investing with a new operator, things can go wrong, and that adds risks.
Let’s dive in here. Let me see what I got in my notes here. Concrete costs. Brand new homes. We have about five mobile home parks up in Illinois. Geez, it’s been about five or six years ago. We were planning on bringing in used homes and raised money to do so.
Then we realized oh man, we can’t find that many used homes. We need to bring in some new ones. We pivoted to new homes and this was like my third or fourth. We had some parks, but not as big of an infill project as this one was. This was in the state of Illinois, which has more regulations than some other states and it’s a HUD state.
We’re bringing in these new homes. We quoted for the concrete work and the site prep work $5000 per lot, which was not enough. Because we needed to install piers, concrete piers, that go down below the frost line and they have to be 24 inches in diameter and go down below the frost line and that’s where they will set the blocks on to block level tie down the home. We didn’t raise enough money. We came in and we needed to not only get the concrete installed, but we had to pull up the concrete that was there. They didn’t allow us to use the pads that were there previously, because there were cracks in them and things like that.
We had to pull that out and we had to install the new concrete. Then we had to mount it underneath the home so that water wouldn’t sit underneath the homes and we went over budget. That’s why luckily we had a miscellaneous budget on that deal. But that could have been a very costly mistake. We were infilling like 43 homes in that group of communities. That’s a big one.
Another one. One of my first parks that I bought myself with no investors, we bought some brand new homes. I think we bought eight of them. They bring them in. I’m there. I’m in the park. I’m ready to receive these homes. Newbie Andrew didn’t know what he was doing and the truck drivers were like hey, I got to go back and get another haul today. Where am I putting these homes?
There were some cars in front of the vacant lots where these homes were going because I didn’t notify the neighbors enough ahead of time to move these vehicles so they couldn’t get into the vacant lots. They had to leave the homes in the middle of the road, not in the middle of the road, but like on the side of the road, up against the side in front of some other homes and they left.
I was like, wait a minute. I need you to get these on the lot. Can you just wait for a little bit? I’ll try to get this car moved. He’s like, no, dude, I got to get back. I have another trip I have to get through today. Literally, he left him on the road and had to find another transporter to come. Again, this was time.
He wasn’t able to come the next day. It took a couple of weeks to get this other transporter back out there to get the homes and spot them on the lot. Meaning that you have to go back and forth, back and forth, back and forth to get it in the exact spot where it will sit on the blocks, which takes time.
It ended up costing me another $1000 or $2000 to have this separate truck driver come and spot all these homes on the lots. That’s another thing that I didn’t budget for and luckily it wasn’t like 10,000, but still, it was a first-time investor that was figuring it out as I went along. That was in Deer Run.
The next issue is utility hookups, add more complexity that’s a risk. Every municipality, and every utility company may have different requirements. One park we bought in Covington, Tennessee, it’s called the Smithville Mobile Home Community, we bought it, and it has 61 lots. Basically, we were going to infill eight homes, eight all brand new homes. We bring the homes in block level, tie down, and get them set.
I’m thinking we’re golden here, right? We’re hooking up the utilities. Then all of a sudden these new homes, which have a 200 amp panel, are having brownouts where basically the power was shorting out on a consistent basis for the people that were living there. We got the power company out there and said hey, what’s going on?
Little did we know, we did an electrical inspection on the park and we walked through with an electrician. He showed us all the pedestals and said you need to get some more conduit here to cover up these lines. But everything looks mostly good. We’ll just get these little items fixed for you. He said everything looked great.
The power company engineer comes out and he says you’re having brownouts because you have one transformer feeding 25 homes and one transformer is only supposed to feed like five or six mobile homes and the main line was lower voltage because older homes weren’t 200 amp panels back then they were lower on these older homes. Not only did we bring in these 200 amp panels, brand new, all-electric homes. But it’s daisy chained and there’s one transformer feeding all of it.
Long story short, we said, okay, so typically the power company pays for this, right? They said no, sorry, you’re going to have to pay to get six more transformers installed in this park, and it’s going to cost you anywhere from $60,000–$120,000. Couldn’t even give us a definite amount on what the budget was going to be.
That’s another area where if you don’t look into that up front, you don’t talk to the engineer up front to understand what’s coming in terms of utility infrastructure and what the main line is feeding your pedestals. It’s an expensive mistake. I think that’s another reason why a new first-time investor may not be looking into all those things.
Another one is buying in Northern states where it gets cold. The depth of the water lines and the sewer lines can make installing or repairing way more expensive. We own a park in Crookston, Minnesota, which is just outside of Grand Forks and literally the water lines are 10 feet down underground. Ten feet down.
Anytime we have a water leak or a riser that, like, apparently the ground shifts when it thaws and when it gets cold and it thaws out, the ground will shift and the water line will come off 10 feet down in the ground, the water riser will come off. We got to pay $3000 or $4000 to have someone go out there, excavate, pull it all up. Then you gotta like to grade the area after they dug up all this dirt and messed up your nice facade.
Another thing you need to be aware of in northern states is there will be additional costs for heat tape and insulation and getting those little insulation boxes that go around your water meters when you submeter the homes. There are just additional costs for that type of stuff that again, if this is your first park you’re wearing a lot of hats and you may not get to that.
Another thing with infill, a small but important thing that we learned is your steps. It’s like we can pay someone $600. They’ll build us a four-by-four platform with some steps that go up to each door, two per home. You also have to remember if the ground is not level, those steps are not going to be level and they won’t be able to open their door if the steps come up and are kittywampus.
Basically we had to install a little platform or a foundation of concrete and then put the steps on top of that so that the steps are always level. Again, when you’re right, when you infill the steps may work fine, but then as the ground shifts and it thaws and it gets cold again, and it thaws and gets cold again, that could be an issue and people won’t be able to open their door. That’s a huge fire safety issue if they can’t open their door because the steps have pivoted up and now they’re blocking the door.
Just the littlest things that you don’t think about until you’ve been through it. Then we went through this, the tenant wasn’t telling us hey, my steps are all kittywampus because the ground has shifted and I can’t even open my rear door so I had to go out there and it was the foundation. We had to install some concrete under those steps, which again is an additional expense.
Vinyl skirting is a big piece with infill. Skirting a home used to cost $500 in labor and $500 for the material and you can get it done for $1000. Not anymore with COVID and everything, the pricing went up for the vinyl skirting. Then also what we’ve found is if you go cheap on with the vinyl skirting and you don’t get like the landscaping timbers that go behind the skirting that go underneath the home that give it a little bit more stability, then you’re skirting is going to be blowing off with the wind and you’ll have it blown down and it’ll just look really bad.
It’s worth the little things like having the foundation, having the skirting on top of either the concrete or having a landscaping timber behind the skirting underneath the home. Another thing that helped make the park look better long term so that when you ReFi or sell, you’re getting the most bang for your buck because the park looks good and everybody’s skirting is not blown in under their home.
That leads to other issues. There’s metal skirting, which is more durable and it insulates under the home better than the vinyl stuff. Also when you’re talking about underneath the home, the underbelly, and the insulation under there, next up we’re going to talk about used homes versus new homes.
If you’re looking at a used home, and this is something from mistakes, we would buy used homes and we would never look under the home. Didn’t need to walk through the house. Everything looked nice. We bought the home, got the title and the transporter calls us and says hey, man, I can’t move this home. There’s no underbelly. There’s no six mil plastic under the home, which helps insulate the home. They’re going to have super high electric and heating costs. Then also, there’s no insulation underneath the subflooring and so it’s super cold. Also, the transporters are like I can’t move the home because it’s so rotted out under here that the home’s going to fall apart.
There are those issues that could come up that add additional risk. Going into my notes here, used versus new. Used homes require good rehabbers so there’s more risk when you’re having to deal with these rehabbers because you can’t just go hire a general contractor to typically renovate a mobile home. You’re going to get more of a chuck-in-a-truck type of handyman that’s going to be able to do this type of job.
It’s hard to manage remotely, especially if you’re not right down the street from this mobile home park, it’s going to be tough to manage those types of projects remotely from our experience.
You can easily go above your budget. The next thing you know, you went down the path, the handyman goes rogue, your $10,000 into the rehab, he demoed stuff, and now it’s going to cost more to get it back to what it should be and you have to hire a new contractor and he wants $15,000. Now you’re $25,000 into the home to rehab it, plus your set costs, plus the home costs.
It’s like geez, should you have just gotten a brand new home at that point which would kind of help with the appeal of the park and so forth. That’s an ongoing debate that we have with every home that needs a major rehab hey, should we demo it and bring in a new home, or is this salvageable? And is it going to be a good home? Is the home going to stay warm? Is the underbelly there? Is the water lines, utilities, the hot water tank, the furnace, all of that kind of stuff you got to look at upfront when you’re doing infill with used homes specifically?
Then with new homes, new homes typically require that you meet HUD standards in most states, not every state or HUD states, but Illinois and Michigan, where we own a lot, are HUD states. Again, there’s a HUD inspector there’s the local inspectors as well, but you need to meet with both the HUD inspector and the local inspectors to fully understand all of this and the concrete work and what’s needed with the new homes, but there is more regulation and more requirements for new homes than there is typically with used homes. Just knowing that and knowing for your budgeting purposes to be aware is important.
We own a park in Norfolk, Nebraska and this building inspector is very strict. They have a code and basically, he is not a fan of mobile home parks. The park is in a very dense urban area. It’s Norfolk, Nebraska, but it’s in a part of town that kind of makes it more of a subdivision area and he just doesn’t want it there. It kind of feels like he doesn’t want it there in that part of town. It’s not like it’s on the outskirts. It’s right in town there.
He makes it hard for us to infill. To the extent that any used home we want to bring in, he needs to go drive out. We need to pay him to go to the city to have him drive out and look at the home and approve it first and he’s never approved a used home that we’ve sent him. Then it’s like oh, wow, the plan was to go to used homes. Now we’re pivoting to brand new homes.
Then with the new homes that are coming out of the factory, he has additional requests and requirements on those, like little issues. If the smoke detectors aren’t hardwired in, he’s going to require that and have you redo all of that. It’s a unique scenario, but some cities you just need to know are going to have more requirements and you need a bigger budget if you’re going to have to be infilling in those markets, because there may be additional things required that you don’t even know, but this guy, just to kind of make it hard on you can add that in and say you need this. You need to have more GFIs in the home than the way it came from the manufacturer. Then you have to do that, otherwise he won’t give you the certificate of occupancy.
Another piece on the used homes, it’s very hard to find them. In some markets like Austin, Texas and Dallas, Texas, it’s very hard to find a used home anywhere. Not that it’s impossible, but like, it’s very tough to find them within a normal budget, which we typically raise, I think, $25,000 or $30,000 to bring in a used home and get it ready to go.
But in some markets that’s just unrealistic and it’s not going to be possible, uh, especially on the West Coast. It’s harder to find and can take more time. If you have a program you’re sticking to, it may make sense to go with new homes because it’s more predictable.
Another big issue that’s not talked about enough is matching the size of the home with the size of the lot and the required setbacks. Setbacks are like the distance from the road it has to be back. The distance from homes can’t be just butting up to another home in the back. There has to be a distance between the back of the home and the other home on the other side and then the homes on either side. There needs to be a requirement there and every city can have different requirements. It’s not just like a standard code.
Since these parks, a lot of them were built 50-plus years ago, they’re grandfathered into the setback requirements of when they were built. That adds other complexities because a lot of the homes back in the 60s and 70s were like 12 feet wide so they were in the setback requirements were very crunched on top of each other.
They’d allow 12-foot-wide homes with maybe five feet in between and you can just stack them in some of these urban areas. Now the standard mobile home is 14 foot wide and a lot of them are 16-foot-wide homes.
If you’re trying to bring those in you may lose lots and you thought you were going to be able to buy this 80 lot park and there are 30 vacant lots and you’re going to put 30 homes on those. But with the new homes, the setback requirements and so forth, you may lose some lots.
If there are lots right next to each other, you may need to put one home between two lots to be able to meet those requirements since you’re bringing in brand new homes instead of homes that meet the exact size of when they built the park, because it’s really hard to find those 12 foot by 48 foot long mobile homes that were manufactured 50 or 60 years ago.
Just things to be aware of. Again, it adds more risk because you have all these factors that you need to worry about. You still needing to manage the property. You’re still needing to keep track of your water sewer recapture. You still needing to work with tenant relations and make sure violations are getting handed out. It’s a whole thing, infill is. It’s not like a bolt-on. It’s not just like an easy bolt-on to a mobile home park operation.
In conclusion here, I’ll get through my notes. We’re almost done. There’s a lot to it. It’s not a walk in the park. If you’re a new mobile home park investor and you don’t have a big team to assist you, at this point now, since we have some scale, we’re able to have an infill person. We’re able to have specific project managers that can help with the infill process, but when it’s just you, back when I had my first five parks, it was just me, I was opening the mail. I was talking and taking tenant calls. I was trying to hire and fire onsite managers. I was collecting rent and making collection calls.
When it’s a new investor, you just need to be aware that there’s likely more risk because they haven’t done infill before and they’re going to be wearing a lot of hats. An infill requires them to wear a lot more. It’s important.
So be careful on these projects as the numbers typically look good on infill value-add mobile home park deals on the spreadsheet. On the spreadsheet, the returns look great and it seems pretty straightforward. There are 100 lots. There are only 80 occupied. Just got to bring in 20 homes, but at what cost? What’s that going to look like? Execution is a whole nother situation that there is an execution risk here that needs to be talked about.
We’ve actually bought three mobile home parks now from operators that ran out of money and they planned on infilling and ran out of their budget. Then the whole project came to a halt because they were just using cash flow to try to finish out some of the infill on the homes they brought in and get it installed and so forth.
There were homes literally just sitting there that couldn’t be occupied because they hadn’t been in hadn’t been installed properly. They didn’t have steps. They didn’t have skirts. They were likely paying a mortgage on those homes to have them. Uh, and then they decided to sell. It’s that kind of situation that could happen and just being aware of that, that like hey, there’s execution risk here. If they run out of money and now they’re using cash flow to infill you could be in a really tough spot as an operator and as an LP with no control.
The strategy of infill takes a long time typically, and it can leave you cash-poor, especially if you’re trying to use the cash flow to reinvest into the property which could present another risk for LPs if the GP themselves run out of money. I think that’s another point that can be talked about is we have had, jeez, I think three or four projects where we didn’t raise enough money and the GPs like myself and my other partner actually put money into the project to help finish the project and get to the refi point faster.
If you’re a first-time mobile home park buyer, when I was buying my first park, I didn’t have any more money. I didn’t have the ability to put that extra cash in there. Another issue is with the lenders. They’re going to be checking on the GP that’s signing recourse on the loan. They’re going to be requiring at least annually that you send in your personal financials along with proof of proof of your liquidity and so forth.
When it was my first deal, luckily I partnered with someone that had a very big balance sheet and had the liquidity requirements. But when it was my first deal, right? I had to get crafty to get that deal done, but I didn’t have a ton of money myself. Most first time GPs don’t.
If they don’t have that money to put into the project, that’s one issue. If they don’t have the money in the liquidity to show on their annual financial reporting to the bank in the loan docs, it likely states that that lender can call that loan due. Think of that.
I’ve heard horror stories about this. I was a self storage mastermind a couple of years ago and the head head guy, Scott Meyers, he had loans called due during the great financial crisis where the properties were performing. They were making their debt payments and everything, but the bank sold the loan to another bank that decided hey, we don’t want to be in the self storage business. Let’s hire some attorneys to go through these loan docs and find a covenant that would allow us to call this loan due so that they have to like refinance it or sell it so we can get this off our balance sheet.
That is scary to me. Not that we’re in that type of situation now with the economy, but that’s just knowing that that has happened in the past. If an operator doesn’t have the right liquidity, that the loan could be called due, it can put your capital at jeopardy, it can put the deal at risk and it’s scary.
We’ve made mistakes ourselves. Luckily, we had the wind at our back. Again, I’m not oblivious to the fact that low interest rates covered up a lot of stuff and again, we’ve blown budgets ourselves and thankfully we were able to put that cash in without needing a capital call from investors.
But we’ve also had other deals where, I think my fourth and fifth deal, we needed to call Capital. I only had one investor at that time that was, I was helping, but again having to do Capital calls, no LP likes to hear, uh, that they needed to influx Capital into a deal because you ran out of money. That’s just another issue with infill is that that could be more likely pending on the operator in the initial budget.
Be safe out there. I highly recommend investing with experienced mobile home park operators that have a proven track record of completing infill if you go for these types of projects. If I were you, I would request that you try to hear about other projects they’ve done and ask for some proof on some projects that they’ve done and ask how those went, what hurdles did they face and so forth.
Anyways, thank you all so much for listening. I appreciate you all. If you got any value out of this, it would mean the world to me if you could leave us a review. Thank you again for listening and have a great day.
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