Raising finance to buy a mobile home park

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Who should you approach for the funding of a mobile-home park acquisition and how do you convince them that it constitutes a shrewd investment?

Approaching your bank is the obvious route to take initially, but there are alternative means. Seeking a business partner is one option, ideally one with a background in the leisure sector should you lack such experience yourself.

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Equity partners

A business partner who injects capital in return for a share of the profits may want to have a say in how you run your business or they may be more hands-off. Establish the parameters of your relationship from the outset.

Institutional investors will often invest in mobile home parks where they are convinced that an asset represents a stable long-term investment.

Whoever you seek finance from, a business plan detailing your immediate and long-term goals for the park, how best- and worst-case scenarios will be dealt with, and all backed up by a clear, concise summary, is essential.

Define your target’s unique selling points. And could fresh investment in crumbling infrastructure add new unique selling points?

Show the bank or investors how you can surpass the performance of the previous owner and you’ve got yourself a strong case for attracting funding.

Perhaps there’s an improvement you can institute for very little investment – a more competent management style for example. Or maybe you can furnish evidence that the market will bear a higher rate than the park is currently charging customers.

Promises of boosting profits based on improving infrastructure obviously require a higher level of funding. Perhaps it’s simply a case of adding more mobile homes if the homes-per-square-foot ratio is comparatively low.

Establishing whether you can secure planning permission to build further infrastructure or the feasibility of buying adjacent land to expand the park’s boundaries should – providing you can convince investors that there is sufficient demand to warrant it – increase your chances of success. Do the groundwork yourself so you’re ready should potential backers quiz you on such matters.

A poorly positioned park with excellent management and infrastructure won’t be the most attractive of investments – for you or your backers.

Location is everything where mobile home parks are concerned, so as long as you’re situated well, ideally with little competition, then it’s easier to argue that investment in dilapidated infrastructure can reap rewards in the medium or long-term.

A good barometer for judging location, aside from the popularity of the nearby area and its attractions, is the “drive time”: where is your customer base located and how long will it take for them to reach your park?

Obviously, a park with permanent rather than holidaying residents is a different matter.

If you don’t have the benefit of a great site – and even if you do – a plan to provide amenities which make your caravan park an attraction in its own right can boost an acquisition as an investment. This might include a swimming-pool or other indoor activities for children and families, unusual accommodation such as tipis or log cabins, or on-site bar and restaurant.

Decide whether your park will be aimed primarily at weekend guests, holidaymakers or long-term lets, and work out how your advertising can best reach your chosen group.

“If you can show anything above a 5% return”, one expert in leisure-asset management told BusinessesForSale.com, “it’s got to be attractive to someone sitting on a pile of cash in a climate where many equities are struggling.”

One of her clients, she says, “is very much looking for family run, owner-managed parks because they tend to be asset-rich and cash poor.”

BusinessesForSale.com is a world leader in buying and selling businesses online. Our primary aim is connecting entrepreneurs, business intermediaries and marketplaces within the B2B and B2C arenas.

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This article has been submitted by a third party contributor.

Love what you do daily,

John Fedro

 

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