A Look at Three Mobile Home Park Sale Strategies
What we’re talking about in this article is not the process of finding mobile home park brokers, putting parks up for sale, and doing marketing. No, we’re talking about end-stage details here—the exit strategy as it pertains to relinquishing responsibility for a park and getting money from the sale. You could say this is an article about sale terms or exit strategies.
Why the Sales Terms Matter
If you’re considering selling your mobile home park and haven’t thought much about the terms, start now. Do you want to sell your mobile home park for cash, walk away with a lump sum, and leave the obligations behind? Are you interested in financing the sale and being tied to the park for a while? How about retaining ownership and leasing the park with an option for the buyer to purchase it later?
The terms you decide on will impact your asking price and the tax implications of the sale.
Sell the Park for Cash
A cash sale doesn’t mean you walk out of the bank with a fistful of real dollars. It does mean you walk out of the bank with a check, though.
A cash sale means that you are not personally offering to finance the deal. How the buyer gets the cash together is up to them, but they come to the closing table ready to pay in full. When all paperwork is signed, you walk away with a check for the amount you agreed on, and you have no more ties to the buyer or the park.
This is a good sale option when you want a clean deal and a lump sum payment.
What you must consider with a cash sale, however, is the potentially hefty tax implications. These include capital gains tax and recapture tax. Speak with your accountant to understand the taxes you’ll face if you go this route.
Also consider that if your park contains rental units, and/or if it’s valued at less than one million dollars, buyers will have to work hard to find a lender willing to finance the sale. When they do, interest rates may be high.
The bottom line is that it’s not always easy to a) find a buyer who has the cash in hand to purchase your park, or b) find a buyer who can find a lender willing to finance a small park or a park with rentals.
Therefore, you’ll be motivated to set the asking price at a lower amount than you would in a sale with other terms.