BUY THE PARK FROM MOM & POP
Dave Loop is an attorney who assists residents with park purchases.
He also serves as VP for Resident Owned Parks for GSMOL.
Do you live in a family-owned manufactured-home park? If so,
this article is for you. Sooner or later, the park will be put up
for sale. The buyer will probably be a real estate investment
partnership, limited liability company or for-pro_t corporation.
Manufactured-home parks are valuable multifamily rental
properties, much sought after by real estate investors. These
investors have lots of money to spend. Eventually, most family
MHP owners will “cash out” and retire – all that money is very
When the family sells the park where you live, your situation is
likely to change for the worse. Rent was a_ordable under family
ownership. But many investors view park residents as a way to
make money – nothing more. Your rent will start climbing after
the investor owns the park.
You’ll have some protection if your area has a rent stabilization
ordinance (RSO). But if the RSO allows the investor to passthrough
increased property taxes (many RSOs do), your rent will go up.
If the park is not protected by an RSO, your rent will
increase (perhaps rapidly). You’ll face two choices: (1) pay the
ever-increasing rent or (2) sell your home (at a reduced value)
and move. Today, many manufactured-home owners around
California are facing these grim choices.
What Can You Do?
Your goal is to protect your economic future and quality of life
from predatory real estate investors. You can achieve this by
(1) organizing your neighbors and (2) buying the park from the
family before they sell to an investor. If the residents buy the
park, rents will stabilize and home values will be protected. You
and your neighbors will have taken control of your housing
Your Hole Card (and How to Play It).
The dictionary says a hole card is “an advantage held in reserve,
for use at a strategic moment.” When buying an MH park from a
family, your hole card is the tax advantage the family gets if they
sell to your resident group. To understand this advantage, _rst
consider the family’s tax disadvantage if they sell to an investor.
When an investor buys an MH park, they give the seller large
amounts of cash (often, millions of dollars). Much of this cash
will be a taxable capital gain for the seller. A capital gain is the
di_erence between a property’s basis (its current value for tax
purposes) and the amount the seller gets for the property.
When a family sells a MH park, their capital gain can be huge.
Their basis is low because they’ve owned the park for many
How can the family minimize its capital gains tax when selling
the park? Answer: By selling it to your resident group using an
“installment” sale. Your resident group pays for the park over
time, not in one lump sum. This spreads the family’s income
from the sale (and their tax liability) over time as well. Unlike
being paid “all cash,” an installment sale can save the family
many thousands of dollars in capital gain. The installment sale
method is your “hole card.” Investors don’t use this method
because it doesn’t put enough of their money “in play” at one
An installment sale works like this: (1) The family sells the park
to the residents’ nonprofit corporation, and the corporation
becomes the park owner. The park’s real estate is the collateral
for the family’s mortgage loan to the residents’ corporation. (2)
Your corporation’s monthly mortgage payments give secure,
regular income to the family that is taxable only when they
receive it. (3) The family has avoided a capital gain tax “bite”
since they were not paid in full when the park was sold.
Your Action Plan.
Be cordial and businesslike with the family-owner. Send them a
– Your resident group is interested in buying the park;
– The residents can create a nonprofit corporation that will pay
top dollar for the park property;
– The residents’ corporation can get commercial mortgage
financing to buy the park. However, an installment sale would
help the family with its potential capital gains tax problem.
Please contact me if you live in a family-owned MH park. I’ll
help you communicate with the owners in a way that may lead
to resident park ownership. If you live in a family-owned park,
but don’t have time or energy to work on this, you can still help.
Please give this article to another resident (or residents) who
might take a leadership role, and ask them to contact me. By
exploring this idea, you and your neighbors have everything to
win – and nothing to lose.
Deane Sargent and PMC Financial Services have been helping mobile home park resident groups and cooperatives to organize and find financing to buy their parks for over 20 years.