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.
Finance the Sale Yourself
Offering owner financing is a way to greatly expand your pool of potential buyers. It’s also the best way to get a higher sale price.
Park owners who carry a loan end up with a passive income stream since they are receiving payments for both the principal and the interest portions of the loan. The payments are considered income, however, so they are subject to taxation.
Park owners who don’t need to sell outright for a lump sum may find the owner-financing route attractive. A source of long-term income can be helpful.
The Lease with Option to Buy
This arrangement is somewhat like the rent-to-own concept in retail housing. A buyer leases your park and makes monthly lease payments to you. He or she gets all income generated by park residents and tenants and is responsible for the repairs and upkeep of the park.
Eventually, the buyer can convert the lease to a sale. “Lease Option” terms, including the length of the contract, vary widely from seller to seller.
One benefit of a Lease Option arrangement is that if the park needs repairs and improvements, the work doesn’t have to be done right away. Depending on your terms, the buyer may take care of them, or you may pay for them.
The Lease Option is a way to get out from under the daily management of your mobile home park and enjoy a passive income stream. It also avoids the capital gains and recapture taxes incurred in a cash sale. However, the lease income is taxable. Another component of this term to remember is that you must have an ongoing working relationship with the buyer.
About Cash Mobile Home Park Buyers
If you’re interested in selling your park for cash, consider finding a mobile home park investor such as our company, Mobile Home Park Instant Offer. We are based in Houston but purchase parks throughout the United States.
We buy mobile home parks quickly, as-is, and for cash. We usually need a basic inspection to give us information to make an offer, but no repairs or improvements are necessary for the sale.
We’ve been in the real estate investment sector for over a decade. The Better Business Bureau has given our founding company an A+ rating.
If selling a mobile home park for cash is the exit strategy you desire, please call us. We can make that happen as quickly as you want. You’ll be finished with your ownership responsibilities and have a lump-sum payment in the bank. You can reach us at the number you see here:
Wrapping It Up
If you’re ready to get out from under park ownership, you must decide on the best exit strategy before you look for mobile home park buyers. Should you sell for cash? Owner finance? Lease with the option to purchase? All three strategies have pros and cons. Include your accountant in the decision-making process so that you understand all tax implications.
Still have questions?
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