Developing an Exit Strategy for Your Mobile Home Park

In this article, we’re not talking about how to find mobile home park brokers, put parks up for sale, and market them. We’re talking about the end of the process or the exit strategy for giving up control of a park and making money from the sale.

What is an Exit Strategy in Real Estate?

Exit strategies in real estate are plans that investors make to remove themselves from a real estate transaction in the future. To fully achieve one’s goals, it is essential to put together a solid exit strategy since doing so will guarantee the possible rewards with the fewest potential drawbacks.

Investors far too frequently fail to see the need to educate themselves on appropriate real estate exit options before making a purchase.

Why You Need An Exit Strategy for the Sale of Your Mobile Home Park

An investor needs to have an exit strategy because not only does it direct the decisions that an investor makes throughout a particular transaction, but it also specifies how the investor will maximize their profits. When facilitating a transaction, the speed of execution is of the highest significance; nevertheless, you should not seek to begin a deal before assessing potential escape plans, even though it may be tempting. When acting in an investor’s capacity, it is essential to examine every likely outcome keeping the destination in mind. Establish a particular strategy for each property before you acquire it. Doing so will help you avoid making costly mistakes. Before making contact with a potential seller, investors should have a crystal clear idea of how they plan to make a profit from every real estate transaction they make.

Becoming familiar with the various real estate exit strategies may save your company hundreds of thousands of dollars, if not millions, throughout your career. It is never a good idea to bargain with a seller before figuring out how you will get out of the agreement. Not only would blind ambition make risks more likely, but it will also eliminate any possibility that there may have been to bargain from a position of power. In essence, failing to identify an exit plan results in reduced potential earnings while concurrently leading to increased dangers.

Why the Terms of the Sale Matter

If you are deciding to sell your mobile home park but haven’t thought much about the terms, you should start thinking about them now. Do you want to sell your mobile home park for cash, get a lump sum, and be free of your responsibilities? Do you want to pay for the sale and stay at the park for a while? How about keeping the park but letting the buyer rent it with the option to buy it later?

How much you ask for the property and how much tax you have to pay will depend on your chosen terms.

Sell the Mobile Park to Get Money

Offering owner financing options is a great way to attract more people to buy your property. It’s also the best way to sell something for more money. When a park owner takes out a loan, they end up with a passive income stream because they get paid for both the principal and the interest. The payments are, however, considered income, so they must be taxed.

The owner-financing option may be suitable for park owners who don’t need to sell their park right away for a lump sum. Having a reliable source of income can be helpful.

Pay for the Sale On Your Own

When you make a cash sale, you don’t walk out of the bank with real money in your hand. It does mean that you leave the bank with a check. When you sell something for cash, you are not offering to pay for it yourself. How the buyer gets the money is up to them, but they have to be ready to pay in full at the closing table. When all the papers are signed, you get a check for the agreed-upon amount and no longer have any ties to the buyer or the park. This strategy is an excellent way to sell something when you want to make a clean deal and get paid all at once.

When you sell something for cash, on the other hand, you may have to pay a lot of taxes. The capital gains tax and the recapture tax are two of these. Talk to your accountant about the taxes you’ll have to pay if you choose this path. Also, if your park has rental units and is worth less than $1 million, it will be challenging for buyers to find a lender to finance the sale. If that happens, interest rates could be high.

The bottom line is that it’s not always easy

  • To find a buyer who has the cash on hand to buy your park
  • Find a buyer who can find a lender willing to finance a small park or a park with rentals.

So, you’ll be more likely to ask for a lower price than you would in a sale with different terms.

The Lease With a Buy Option

This arrangement is similar to the idea of “rent-to-own” in the housing market. A buyer rents out your park and pays you every month. They get all the money that residents and renters of the park bring in and are responsible for making repairs and keeping the park in good shape. At some point, the buyer will be able to turn the lease into a sale. The terms of a “lease option,” like how long the contract is, vary greatly from one seller to the next.

One benefit of a Lease Option agreement is that the park doesn’t have to be fixed or improved immediately if it needs work. Depending on your terms, the buyer might pay for them, or you might. The Lease Option is a way to get out of managing your mobile home park daily and enjoy a stream of passive income. It also keeps you from having to pay taxes on capital gains and recapture in the case of a cash sale. But the revenue from the lease is taxed. Another essential thing to remember about this term is that you must keep working with the buyer.

Get an Instant Offer On Your Mobile Home Park

If you want to sell your mobile home park for cash, you could look for a mobile home park investor like Houston Capital Home Buyers. We buy mobile home parks quickly, as they are, and for cash. Most of the time, we need a basic inspection to find out what we need to know to make an offer, but no repairs or improvements are necessary for the sale.