MHP Brokers Tips and Tricks Podcast, Underwriting 101

September 15, 2022 by Maxwell Baker

MHP Brokers Tips and Tricks Podcast, Underwriting 101

In this episode of The MHP Broker’s Tips and Tricks podcast, Maxwell Baker, president of The Mobile Home Park Broker, will talk about the basics of underwriting mobile home parks and RV communities. This and every Tips and Tricks podcast episode are brought to you by The MHP Broker’s’  proprietary Community Price Maximizer. Use this four-step system to get the highest price possible for your mobile home park or RV community when you sell it through The MHP Broker. Guaranteed. Ask Max for details.

Here Are the Show Highlights:

  • This is the first of what will be multiple Tips and Tricks podcasts on the variables in underwriting mobile home parks principally, but also RV communities. Think of this initial podcast as an introduction to the subject, a sort of Underwriting 101. (:56)
  • We’re not appraisers, but we conduct the evaluations of communities that lenders often refer to in appraising communities. (:56)
  • Utilities are often the number one variable we rely on. Your water system variables on city water include mass metered systems, direct billed and sub-metered. Then there’s well water. Direct billed systems are best in that the resident deals directly with the utility for water and sewer, leaving you totally out of it. Mass metered and sub-metered systems are less desirable to investors, in that the meters can break down over time and you might end up paying for more water than you think your community is using. And, of course, you have to bill your tenants for water. (:56)
  • After direct billed systems, well water can work out okay as long as the well is drilled deep enough and doesn’t go dry. Owners in some states can turn a small profit in billing tenants for their well water, but North Carolina, for instance, is very critical on charging tenants for water this way. So it just depends on the state. (2:57)
  • Lagoons are common as water sources in some parts of the country. Owners might think of them as “free” water, but the cost of filtration and sewer treatment equipment can get ridiculously high. (5:03)
  • Septic tanks are another variable. Some can be at large as a three- or four-bedroom home while others might be two or three times that size! I’ll have more to say about septic tanks in future underwriting-themed podcasts. (7:08)
  • Yet another variable is park-owned vs. tenant-owned homes. Most parks consist of POHs, but you have more TOHs in the inner cities. These are desirable because you can have lower cap rates with them, and less responsibility in terms of maintenance and upkeep. Parks that sell the fastest are those with TOHs, direct billed water and sewer and paved roads maintained by the city. In other words, the less you the owner must do, the more valuable the property. (8:12)
  • Paved roads are the most desired, with dedicated gravel and dirt roads much less valuable, but less of a problem if they’re owned by the city. You can call for maintenance and repairs rather than having the handle them yourself. Concrete roads are problematic because they crack easily and frequently have potholes. (9:42)
  • When investing, you must also look at the property management situation. Some parks have third-party property managers, some have inside managers (they live there and work for rent reduction). The most problematic is the park in which the mom and pop owners are the managers. When they leave or retire, it can take significant time to put new management in place. In the meantime you get tenant complaints and maybe even new vacancies. So this is the most high-risk variable in this area. (11:09)
  • Good clean and complete books and records are most desired and can reduce the cap rate because they decrease investors’ risk. (13:25)
  • Occupancy rates are perhaps the most critical variable when selling your park. One that’s fully or largely occupied gives the new owner less to do and will usually come in at a lower cap rate. (14:06)
  • On a related note, now is also a good time for park owners to invest in good used mobile homes as prices come down from the highs during the pandemic. (15:04)

Reach out to Max to see how The Mobile Home Park Broker can evaluate your community and help you get the best selling price possible. Just drop him a line at or give him a call at 678-932-0200.


Power Quotes on This Episode:

This is the creme de la creme when it comes to mobile home communities, city water

and sewer, direct billed.” (2:57)  

“…if you’ve got a community that’s direct billed, paved roads owned by the city and not

private, all tenantowned homes, lot rents in the $300 and up, I can tell you right now I

can make three phone calls and get you a six cap on something like that,

especially in a primary market. (8:12)

“Management is a huge variable, because you’ve got some management companies

that are massive, and sometimes they’re outsourced. Sometimes there is none and

sometimes there’s a mom and pop doing it. Obviously, the ones that are the less risky

are the ones  that are internal and they’re finely tuned, they’ve been working there for

several years.” (11:09)

“If you’ve got (good books and records), the more information y’all provide about your

community, the higher the price, the lower the cap you’re going to get. Because when

 you lack information, there’s higher risk, which means a higher cap rate.” (13:25)



Hello and welcome to the mobile home park brokers tips and tricks. This is the podcast where we talk about mobile home park investing, because that’s what we’ve been involved in for the last decade. Let’s dive into today’s episode. Here’s your host, Maxwell Baker.

00:22 Maxwell Baker

Hey y’all, welcome to another amazing, colossal episode of The Mobile Home Park Broker’s tips and tricks podcast. As always, this episode is brought to you by the Community Price Maximizer. It is our proprietary system that will guarantee you a higher price. When you exclusively list your community with us. It is a four-step process. Boom, boom, boom, money in your pocket. Community Price Maximizer give us a call 678-932-0200.

00:56 Maxwell Baker

So today we’re going to talk about underwriting and I’m going to do a few different episodes on how we as a company underwrite mobile home communities. So it’s Underwriting 101, I guess you could say. In this episode, we’re going to talk about all the different variables and what makes them riskier, not as risky, and all that kind of jazz. Then as we go and do other episodes, we’ll talk about, you know, the math and all that kind of jazz. So let’s jump right into it. So mobile home communities and RV communities, but really, we’re going to focus on mobile home communities, has a ton of different variables when it comes to us really analysing, we don’t say valuation because we’re not appraisers. But really, the appraisers do give us calls all the time and ask us how to evaluate mobile home communities, so there’s that, but anyways, utilities are going to be the number one variable that we look at.

That’s like one of the very first questions I ask when I am looking at a deal. The types of utilities you have are city-water, mass-metered, direct billed, and sub-metered and then you also got well-water. So let me break that down. Mass metre city water and sewer means that the city just has one little metre outside the park and they just read whatever comes through that metre. Typically metres last anywhere between 7 to 10 years, they start slowing down, but if it’s a city metre, then that’s their problem not yours. If you have a sub metre community, you always want to be checking every 7 to 10 years from what I have been told when it comes to metres because they tend to read a little slower and use a little bit the same amount of water but they’re just reading slower. So if you have a mass-metre and this sub-metres that obviously is a problem, because you’re going to be paying for way more water than you might be thinking you’re using.

02:57 Maxwell Baker

So moving on to direct billed city-water and sewer. This is my favourite. This is the creme de la creme when it comes to mobile home communities, city-water and sewer, direct billed. I actually used to own a community that was direct billed and the city itself actually builds the tents directly just like they do other stuff like trash and whatnot. They pay them so you never mess with it. Something happens with the line, there are some certain areas in the park that might be private, but for the most part, the city owns all the lines coming through the park. Typically it’s the main line and then you have the laterals that you own, sometimes they’ll say look, we’ll own up into the metre but from the metre to the home that’s your guys issue not ours. So a couple of things you should check out when you’re looking at that. Then we have well water which is a big variable with depending on how deep it is and whether it goes dry or not. I mean, it just depends on it. I’ve even seen sub-metered well water but unless you’re in like North Carolina, where they are very, very strict on if you make money on water over there, I don’t know what it is about North Carolina and their water rolls but they’ve always been very, very finicky and somewhat diva-ish when it comes to tenants being profited more than once on the water. Here in Georgia and I went down to Savannah, we did a deal down there. They’re like look, we’ll help you put in the metres and we’ll read them but if you need to, you know, increase the margin a little bit go for it, then you can give a crap on whether or not the tenants we’re getting profited on more than once. So then we’ve got city-sewer, we’ll move over to the sewer side of it. Sewer is pretty much what it is. I mean, you got the lagoons and you’ve got the city-sewer like you just said. You’ve got the septic tanks, and then you’ve got these sewage treatment plants.

05:03 Maxwell Baker

Now I have seen septic and city sewer combos and there might be some other combos out there. They’re pretty rare. Surprisingly, up here in Georgia, Hall County is one of the biggest counties that was a big proponent of lagoons. So most of the parks in Hall County have lagoons. I don’t know what it was, but somebody went around approving them and there’s certain areas in the country where lagoons are just prevalent. You just see them more. They’re a lot cheaper to operate compared to the city-sewer, obviously, but they are a little finicky. You should see some of the stuff that crawls out of there. They’re massively huge. I remember the park owner used to tell me, he said, you mentioned some turtle soup, Max. I said, you know, I’ve never had that before, sir. Technically, you said you see that lagoon out there and we get the biggest turtles coming out of there. It’s great turtle soup and I started laughing. I said, I mean, they’re big, but they’re eating shit, man. I don’t know if I’d want to eat that turtle meat. We had a big laugh about it. Yeah, the lagoons are interesting. Just a big old pond and stuff goes in, it sinks to the bottom, you got to have an aerator and all that jazz. I mean, it can get pretty complicated. I mean, they got the sewage treatment plant, which is a packaging plant, another word for it. Those can get really, really expensive real quick, it is not uncommon for people to swap out an STP for half a million dollars. It is probably up to a million dollars now to buy one that’s going to serve as a 75 per unit community. They are just ridiculously expensive, but it just all depends on whether or not you know whether or not the Land perk, you know, what are the limitations in the area? I mean, if you got an area that’s got $1,000 lot rents might be worth the investment to do that, but if it’s an area where there’s $100 lot rents, I mean, sorry, it looks like you’re SOL man, I’m not putting in half a million dollar at least lagoons sewage treatment plant. So there’s that as well.

07:08 Maxwell Baker

Septic tanks. There’s some variables here: you got 1:1 septic tanks, 1:2, 1:3,1:4, 1:5 you always have to ask how big the septic tanks are. Typically, I’ve seen them a 1000 to 1500. That’s a three bedroom, four bedroom home. Some communities have really large ones that are double, triple the size of what I just said and they service like a cul de sac or whatever. But it’s all depending on like, you know, you got to do your due diligence. We will go over more of the risk profile on the second part of this underwriting podcast. We’re going to do quite a few talks about underwriting. So that’s a little bit on the water and sewer for utilities. You’ve also got direct billed,electric and gas. Sometimes those are not direct billed. I see that more on the west coast, where they include electricity, and maybe even gas but it’s very rare here in the south to see a community that is not direct billed when it comes to usage for electricity and gas.

08:12 Maxwell Baker

Moving on to park owned homes versus tenant owned homes. I mean, obviously these communities in the south are mostly park owned home communities. You are seeing more in the inner cities that are tenant-owned homes where they are their own by the tent. Everyone is looking for those obviously those demand lower cap rates, park owned homes demand a higher cap rate, y’all it’s just about how many variables the park has, the more variables your community has, the higher the cap rate if you’ve got a community that’s direct billed, paved roads that’s owned by the city and not private, all tenant owned homes lot rents in the 300 and up I mean, I can tell you right now I can make three phone calls and get you have a six cap on something like that, especially in a primary market. They just don’t come available and they are just crazy in demand. So moving on to roads like I mentioned, you’ve got private roads, dedicated roads, gravel roads, dirt roads, you know, these types of roads out there. You know, there are different types of dedicated roads. I’ve seen dedicated pay, dedicated gravel, dedicated dirt roads, the very first park I ever sold was a dedicated dirt road. They literally had probably, I don’t know how wide – they were about as wide as a highway running through this park I sold in Dublin, Georgia. Beautiful Dublin, Georgia, where the police love to write you tickets on the highway.

  9:42 Maxwell Baker

They’re so aggressive over there. Anyways, the road out there was a dirt road and it had those little waves in it when you’re driving over a dirt road. You know, you see and you just feel like you’re driving over. You need a four wheel drive just because of how bumpy it is but they’ll come out there get a scraper, get all that stuff you got to make a phone call and fix it. It was a dirt road and owned by the city. So they exist, but most of the time, what I’ve seen, I would say 90% of the dedicated roads that I have seen in communities have been paved and you get a pothole, you give them a call, and they’ll come out and fix it, get the gravel roads, they’re out there, though, might lay the gravel, but I just don’t see any cities wanting to take on a gravel road simply because of the cost associated with that. So typically, all these different types of roads are going to be like I said, you got paved, sometimes they’re concrete, I’ve seen Caliche. I think Frank Rolfe mentioned Caliche in the past, I’ve never seen it over here, but it’s probably a Midwesterner kind of thing I’ve seen in parks. Then you’ve got the gravel, like I said, dirt in concrete, I’ve seen concrete roads as well, they crack a lot. So I don’t know if I’d recommend that, you know, a little rough and little, they’re a little more high maintenance than you would anticipate like a paved one. I’m not a road concrete guy, so don’t misquote me here, but they are not as flexible as blacktop pavement stuff. So that’s the reason why they cracked so much. I have so many issues.

11:09 Maxwell Baker

Moving on to management, management is a huge variable, because you’ve got some management companies that are massive and sometimes they’re outsourced. Sometimes there is none and sometimes there’s a mom and pop doing it. Obviously, the ones that are the less risky are the ones that are internal and they’re finely tuned, they’ve been working there for several years and the mom and pop just, you know, manages it from a macro level, I get a little nervous when I see a park come through our doors, and they’ve got, you know, the poor seventy year old crawling underneath the mobile home and is sweating and you know, I give a mad respect for still working at that capacity at that age and I’ve seen a lot of guys and girls that do that. But the problem with that is, is that when you go to sell your community, you’re not going to come and manage anymore, you’re selling it because you want to stop, you want to retire. So a lot of people view that as very risky and it is I mean, I’ve even bought a Park facility or you want to call it I’ve got storage as well where management disappeared. As soon as we took over and we had to reinvent it took us about a solid 90, 120 days of back and forth with hiring people making sure we have the right systems in place, it just takes a lot of time. So you literally lose a lot of sleep over it, you could lose occupancy over it. So there’s a lot of risk with management if it’s a mom and pop because it’s not transferable, typically. The cream of the crop is like I said, having somebody who’s been on the staff for a while, knows what they’re doing, understands the programmes, understands how to get people in and out. Then you’ve got the very risky one, whereas like zero management, because something happened and those are typically going to affect your cap rate substantially. So make sure when you sell if you can obviously try and get the management streamlined. The more variables you have, when you sell your mobile home community, or even anything when it comes to investment, the higher the cap rate is going to be you have more risk. This is it.

13:25 Maxwell Baker

Moving on to books and records, you either got them or you don’t and sometimes you kind of do those are really it, but if you got them, the more information y’all provide about your community, the higher the price, the lower the cap you’re going to get. Because when you lack information, there’s higher risk, which means a higher cap rate. So we’re happy to show you, I’ll walk you through what’s required and what the lenders are asking for, but books and records are a huge variable that could fluctuate your deal substantially on the cap rate list side. So give us a call, we’ll help you walk through but that’s another variable.

14:06 Maxwell Baker

Last but not least, you’ve got occupancy, you know if it’s completely full and an area primary market to own homes and all that jazz, the cream of the crop when it comes to utilities and whatnot and roads. Then those types of deals are about as close as you can get to a triple net retail, Arby’s, McDonald’s, Chick fil A whatever, because you really don’t do anything. You literally just got a bunch of people living in on this piece of land and they are sitting there paying you lot rent. So those are going to demand a very low cap rate. Now, if you’ve got a park owned home community and it’s still full, you’re still going to get a pretty good cap rate out of that. Granted, the cap rate on the lot rent is going to be very similar to if it was all tenant owned homes at least, that’s how we price them, but the value of those homes dramatically changed market to market.

15:04 Maxwell Baker

If you’ve got and I use this analogy all the time with park owners, if you’ve got a 1970’s, mobile home, out in Huntington Beach, California, where they got 5,6,7, maybe even $10,000 lot rents. I don’t know how much they have them out there, I’ll be quite frank with you. I know they’ve been going up. Compared to having a 1970 mobile home in Albany, Georgia, or Tifton, Georgia, or even Milledgeville. If they’re identical, which one’s going to trade for more? You got it. The one where the lot rent is ridiculously high, 5,6,7 $10,000. Those things we’re going to trade for 100, 200, $300,000. Who knows? compared to over here in Tifton and Albany and Milledgeville. I mean, I can pick one up for 1500 bucks. Big difference there. So a lot of the park owned home values and occupancies when it comes to those, those values dramatically change when it comes to the park owned home stuff. Moving back to low occupancy communities, unless you’re in an area where there has been drastic mismanagement, cap rate, there’s a fine line and we can get into it later on the next podcast, but there’s a fine line of when it’s a price per pound kind of deal. Like I look at a deal and the occupancy is 30%, but I look at the management who are aloof,  they have no management but the lot rents are $300. I started getting excited. $300 lot rent is kind of where it starts making sense to buy some used homes in the past.

16:42 Maxwell Baker

Now COVID really messed it up some because the prices of homes dramatically went up, but still like they’re starting to come back down. I was talking to my partner Levi with Mobile Home Wholesaler, and he was telling me that you know, a lot of these manufacturers have been dropping the value of their homes for $100 every other month, like dropping and dropping and dropping. So that is a good sign to show that the values are going to start getting a little bit more reasonable for used homes and new homes. So anyways, going back to the occupancy, occupancy changes the value, obviously, unless you’re doing a big value add then we start looking at what is the replacement costs to add a lot over there. So let’s go over that pretty much wraps it up here. We went over utilities, the park owned homes, the tenant owned homes, the roads, the management, the books and records, the occupancy. The other variable I didn’t even forget to mention that I’ll add is the political climate that can make or break your deal. That’s another variable that we look at when we list a community for sale. The political climate, whether or not they allow homes in their used homes, new homes, whether or not they’re prejudiced towards them to low income people. I mean every area of the country is very different. So that’s the last thing I’ll mention as far as the different variables with mobile home parks and when we are underwriting how we review them. Appreciate your time.

As always, this episode is brought to you by the Community Price Maximizer, it is our proprietary system that will guarantee you, yes, you a higher price when you exclusively list your community with us. Four step program. Uno, dos, tres, quatro, you’ll see ganas de Pere Espanol, Seema Yamas, but I’ll come back to English here to say we appreciate your time and energy, give us a call 678-932-0200 or email me at Thanks for listening guys and let’s keep moving forward.

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Maxwell Baker

Maxwell R. Baker founded The MHP Broker in 2009 as a commercial real estate broker specializing in helping Investors buy and sell mobile home communities throughout the Southeast. His family got started with mobile home parks in 2000 where Max gained experience in management, rehabilitation, and selling mobile home parks. Today, The MHP Broker has grown to a team of several agents with expanded services focused on owner and investor brokerage services, mobile home park audits, and in-depth market research, resulting in the sale of over $500 million worth of mobile home communities.