Mobile Home Park & Creative Finance Glossary

Cap Rate (Capitalization Rate)

Cap rate is how investors compare property values without worrying about financing. Divide the park's NOI by its purchase price — if it throws off $80,000 NOI and you're paying $800,000, that's a 10% cap rate. The higher the cap rate, the more income you're getting per dollar of purchase price. Sellers want a lower cap (higher price); buyers want a higher one.

Example: A 40-space park generating $100k NOI listed at $1M = 10 cap. Same park at $1.25M = 8 cap. The math is the market.

NOI (Net Operating Income)

NOI is what the property earns after paying operating expenses — but before debt payments. Gross income minus your real costs: taxes, insurance, utilities, management, maintenance, reserves. NOI is the number that drives value in commercial real estate. Everything else is downstream from it.

Example: Park collects $180,000/year. After $70,000 in expenses, NOI = $110,000. That's what the bank and the appraiser care about.

Cash-on-Cash Return

Cash-on-cash measures how much cash you actually pocket each year relative to the cash you put in. Annual pre-tax cash flow divided by total cash invested (down payment + closing costs + upfront capex). This tells you how fast your actual money is working — not the bank's money, yours.

Example: You put $150,000 into a deal and it generates $18,000 in cash flow after debt service. That's a 12% cash-on-cash return.

Gross Income

Gross income is all the money the park collects before you spend a dollar — lot rent, nightly stays, laundry, storage fees, late fees, everything. It's the top of the financial stack. Sellers sometimes try to pitch a deal based on gross; don't bite. Expenses matter. What's left after expenses is what you actually own.

Example: Park collects $240,000/year gross. After $110,000 in expenses, NOI = $130,000. Gross numbers look exciting; NOI is what you bank.

Debt Service

Debt service is your total loan payment — principal plus interest — usually quoted annually. It's what you owe the bank or seller every year. Subtract debt service from NOI and you get actual cash flow. If NOI is $100k and debt service is $72k, you pocket $28k/year.

Tip: Stress-test debt service at higher interest rates before you buy. What happens to cash flow if rates rise 2%? Know your cushion.

Amortization

Amortization is how a loan gets paid down over time. With a 25-year amortization, each payment chips away at the balance — slowly at first, faster later. Longer amortization = lower monthly payments = more cash flow. Shorter = you build equity faster but cash flow tighter. Negotiate amortization length like you negotiate price; it matters.

Example: $600k loan at 7% over 20 years = ~$4,650/month. Same loan over 25 years = ~$4,240/month. That $410/month difference is real on a small park.

Balloon Payment

A balloon payment is a large lump-sum due at the end of a loan term — even though you've been making regular monthly payments. Seller financing often has balloons: amortized over 20 years, but the balance due in 5. You need to refinance or sell before that day hits. Always model your exit before accepting a balloon.

Example: Seller carries $500k at 6%, amortized over 20 years, 5-year balloon. In year 5 you owe ~$450k all at once. Know your plan.

Down Payment

The cash you put in upfront to buy the property. Conventional commercial loans typically want 20-30% down on an RV park or MHP. SBA loans can get to 10%. With seller financing or creative structures, the down payment is negotiable — sometimes dramatically lower. The down payment is your biggest cash hurdle; creative finance is how serious buyers clear it.

Example: $1M park, 25% down = $250k at closing. Motivated seller carrying 90%? You might need $100k. Same park, very different cash requirement.

LTV (Loan-to-Value)

LTV is how much of the property's value is financed. A $750k loan on a $1M property = 75% LTV. Lenders set maximum LTV limits — usually 70-80% for RV parks. Higher LTV = less money down but higher rates and stricter terms. Seller financing can reach 85-90% LTV when you negotiate directly — impossible with most banks.

DSCR (Debt Service Coverage Ratio)

DSCR is the bank's sanity check that the property can pay its own mortgage. Divide NOI by annual debt service. A ratio of 1.0 = you break even; 1.25 = you have 25% cushion. Most lenders require 1.20-1.30. If your DSCR comes in at 1.10, most banks will pass — and you should too, because there's no room for error.

Example: $130,000 NOI / $100,000 annual debt service = 1.30 DSCR. Bank is happy. At 1.10, you're too thin.

IRR (Internal Rate of Return)

IRR is the annualized return accounting for the timing of every dollar in and out — including the eventual sale. It's more sophisticated than cash-on-cash because it accounts for when money comes back to you. A deal with strong early cash flow and a big equity gain at exit looks great on IRR in ways cash-on-cash can't capture.

Example: Invest $200k, collect $20k/year for 5 years, sell and net $350k. IRR is roughly 22% — much better than the 10% annual cash yield makes it look.

Equity

Equity is your ownership stake — what the property is worth minus what you owe. Park worth $1.2M, loan balance $700k = $500k in equity. Equity grows three ways: loan paydown, rent increases (which raise the value), and physical improvements. The best deals hit all three at once. That's the triple play every smart investor is hunting.

Appreciation

In commercial real estate, appreciation isn't about "comps" — it's driven by NOI growth. Raise rents or cut expenses, and your property is worth more. This is forced appreciation, and it's the core strategy of active MHP investors. You don't wait for the market to drift up; you make the value yourself.

Example: Raise lot rent $50/month across 50 spaces = $30k more NOI/year. At an 8 cap, that's $375,000 in added property value from one rent bump.

Depreciation

Depreciation is a tax deduction that lets you write off the cost of improvements over their "useful life." On an RV park or MHP, you're depreciating roads, utility hookups, structures, laundry facilities. This creates a paper loss that shields real income from taxes — even as the property actually gains value. It's one of real estate's biggest hidden tax benefits.

Pro tip: Cost segregation studies can accelerate depreciation on specific components, creating massive early-year deductions. Ask your CPA on any deal over $500k.

1031 Exchange

A 1031 exchange lets you sell an investment property and roll all the gains into a new one — without paying capital gains tax. Named after Section 1031 of the tax code. The rules are strict: 45 days to identify the replacement property, 180 days to close. Miss the deadline, you owe the tax. But if you nail the timing, you can defer gains potentially forever.

Example: Sell a small RV park for $800k with $300k in gains. Roll into a larger MHP via 1031 and defer all $300k in taxes — forever if you keep exchanging up.

Seller Financing (Owner Carry)

Seller financing is when the owner becomes your bank. Instead of a lump sum at closing, they receive monthly payments from you — with interest. No bank approval, no appraisal headaches, and terms you negotiate directly. It's incredibly common in RV park and MHP deals where owners are retiring and want steady, passive income instead of a taxable windfall.

Example: Owner sells a $900k park, takes $100k down, carries $800k at 6% for 20 years. They get ~$5,700/month. You get a park with minimal cash needed and no bank in the way.

Master Lease

A master lease lets you control and operate a property — collecting rent, managing tenants, making improvements — without owning it yet. You lease the whole park from the owner and sublease individual lots. The purchase option is usually baked in. It's one of the lowest-barrier ways to get into a deal when you don't have the cash for a traditional purchase.

Example: Master lease a 30-space park for $8,000/month. Fill vacant lots, raise rents, exercise your purchase option in year 3 at a locked price — pocketing the value you created.

Subject-To

Subject-to means you take over the seller's existing mortgage without formally assuming it. The loan stays in their name; you own the property and make the payments. This lets you inherit a low-rate loan that no bank would offer today. More common in residential deals but occasionally applies to small parks with favorable existing financing.

Example: Owner has a $400k mortgage at 4.5% from 2019. You buy "subject to" that loan, keeping the below-market rate instead of refinancing at today's 7%+.

Wraparound Mortgage

A wraparound is seller financing that "wraps around" an existing mortgage. The seller carries a new note to you for the full purchase price, and uses part of your payment to keep paying their underlying loan — pocketing the spread between the two interest rates. Both sides benefit without paying off the old loan first.

Example: Seller owes $300k at 4%. They wrap a $700k note to you at 7%. You pay on the $700k; they pay the bank on the $300k and keep the rate spread on that portion.

Capital Partnership

A capital partnership pairs an operator (finds and manages deals) with a capital partner (provides cash). The operator brings the deal, the management, the upside strategy. The capital partner brings the down payment or equity. Returns split per agreement — often 70/30 or 80/20 favoring the capital partner until a preferred return threshold is hit.

This is how many first-time buyers close their first deal. Find a great off-market opportunity, then find someone with capital who wants passive returns but not the headache.

Rent-to-Own / Lease Option

A lease option gives you the right — but not the obligation — to purchase the property at a set price before the option expires. You pay monthly rent plus an upfront option fee (which often credits toward purchase). Control the park, stabilize it, then decide whether to buy at the locked price — or walk if it went sideways.

Example: $5,000 option fee, $9,000/month lease, purchase price locked at $900k for 3 years. Fill lots, raise rents, exercise the option and capture the upside you created.

Installment Sale

An installment sale is seller financing from the tax angle — the seller receives payments over multiple years instead of a lump sum, spreading their capital gains tax liability out over time. This is often a major motivation for sellers to carry financing: pay less tax per year instead of a huge hit in year one. When a seller seems resistant to carrying paper, bring up the installment sale tax benefit.

Hard Money Loan

Hard money lenders care about asset value, not your credit score. They lend fast — sometimes in days — at higher rates (9-14%+) and short terms (6-24 months). Used for quick acquisitions, distressed value-add plays, or situations where conventional financing won't move fast enough. Always know your exit before you take hard money; the clock starts ticking the day you close.

Example: Win a distressed park at auction for $500k. Take hard money to close in 10 days. Stabilize over 12 months, then refinance into a conventional loan at a better rate.

Bridge Loan

A bridge loan is short-term financing that bridges the gap between acquisition and permanent financing. Used when a property doesn't yet qualify for conventional lending — distressed, low-occupancy, under renovation. Once stabilized, you refinance into a permanent loan with better terms. Bridge loans buy you time to execute your plan without losing the deal.

Be realistic about your execution timeline. Bridge loans are expensive to extend and punishing if your stabilization takes longer than projected.

Private Money

Private money is capital from individuals — friends, family, a retired neighbor, your dentist — who want better returns than a savings account but don't want to run properties. They lend to you secured by the real estate, typically at 6-10%, and you handle everything else. It's relationship-based lending with flexible, negotiable terms. More people say yes to this than you'd think.

The ask: "Would you lend $150k secured by a first position on a park I'm buying, at 8%? I handle everything." Start with people who already trust you.

Lot Rent / Pad Rent / Space Rent

Same concept, three names. Lot rent is the monthly fee a tenant pays to use a site — whether they have a mobile home, manufactured home, or RV on it. The park owns the land; the tenant owns (or rents) whatever sits on it. This is the core revenue engine of MHP and long-term RV park investing. Stable, predictable, and scalable.

Example: 60-space MHP at $425/lot = $25,500/month gross. Raise to $475 = $3,000/month more, $36k/year in extra NOI — worth ~$450k in added value at an 8 cap.

POH (Park-Owned Home)

A POH is a home the park itself owns and rents out. You collect rent on both the land and the structure — higher revenue per lot, but also higher liability, maintenance costs, and management headaches. Most experienced MHP investors convert POHs to TOHs over time to simplify operations and reduce exposure.

A park with lots of POHs often looks great on gross revenue but bleeds cash on repairs. Dig into maintenance history and vacancy before pricing those units into your offer.

TOH (Tenant-Owned Home)

A TOH is a home owned by the tenant, not the park. They pay lot rent only. TOH parks are the gold standard for passive investors — tenants maintain their own homes, turnover is minimal (moving a manufactured home is expensive and disruptive), and your liability is low. Pure lot rent equals pure, simple cash flow.

Stability stat: MHP tenants stay an average of 14 years. When someone owns their home and just rents the land, they don't leave lightly.

ROFR (Right of First Refusal)

A right of first refusal gives a party the right to match any purchase offer before the seller can sell to someone else. Tenants in some states have ROFR to purchase the park. Cities sometimes have it too. Uncheck this box before going under contract — ROFR can complicate or completely block a deal if you don't plan for it.

ROFR laws for MHP tenants vary hugely by state. Some require 30-60 day notice periods; others have no such law. Your attorney confirms this in due diligence.

RSO (Rent Stabilization Ordinance)

A rent stabilization ordinance limits how much you can raise lot rents each year — often capped at CPI or 3-5% regardless of what the market would bear. California is the worst offender. RSOs can kneecap a value-add strategy entirely. Always research local ordinances before buying in potentially rent-controlled markets.

An RSO market isn't automatically a no — but your upside is capped. Underwrite to the actual allowed increase, not the market rate. Many investors skip California entirely for this reason.

Full Hookup

A full hookup site provides water, electric, and sewer connections directly at the pad. This is the premium offering — guests can stay long-term without moving. Full hookup sites command higher lot rents and attract monthly tenants who become your most stable income source. Partial hookup sites (electric/water only) require a dump station for sewer.

Converting partial hookup sites to full hookup is one of the most reliable value-add plays in RV park investing — real upfront cost, permanent revenue lift.

Pull-Through Site

A pull-through site lets you drive in one end and out the other — no reversing required. Premium feature for guests towing large rigs. Pull-throughs typically rent for $5-15/night more than comparable back-in sites and fill first. If you're designing a new section or expansion, they're worth the extra land footprint.

Back-In Site

A back-in site requires the driver to reverse into the space. Most RV parks are primarily back-in — they're more space-efficient, letting you pack in more sites per acre. Not a problem for experienced RVers, but they frustrate beginners. The tradeoff: more back-ins per acre means more revenue per square foot of land.

Seasonal vs Year-Round

Seasonal parks operate only part of the year — May through October in northern climates, for example. Year-round parks run all 12 months. Year-round is generally more valuable: predictable revenue, no dead months carrying fixed costs. When underwriting a seasonal park, scrutinize the off-season expense structure carefully — you're paying overhead with zero income.

Some "seasonal" parks have year-round potential that hasn't been unlocked — heated bathhouses, snowbird marketing, or converting to long-term monthly tenants can extend the season significantly.

55+ Community / Age-Restricted

A 55+ community legally restricts residency to households where at least one person is 55 or older, per the Housing for Older Persons Act (HOPA). These communities have extremely stable, long-term residents, lower turnover, and less wear-and-tear on the property. Many MHP investors target them specifically for predictable, low-drama cash flow.

Changing age restrictions requires specific legal compliance steps — you can't informally reverse a 55+ designation. Check HOPA compliance requirements before attempting to reposition.

Value-Add

A value-add deal is one where you can materially improve income or reduce expenses — and therefore increase property value — through your own actions. Classic plays: fill vacant lots, raise below-market rents, convert POHs to TOHs, bill-back utilities, fire bad management, fix deferred maintenance. The gap between current performance and potential is where the money gets made.

The best value-add parks are under-managed by tired owners, not structural disasters. Low-hanging fruit — 30% vacancy or rents $100 below market — can be worth millions in equity creation.

Stabilized

A stabilized park is fully leased (or close to it), operating at market rents, with no major deferred maintenance or management issues. It's the "after" state of a value-add. Banks love stabilized assets; institutional buyers target them. The flip side: stabilized parks trade at lower cap rates because the hard work is already done. You pay up for the stability.

Distressed

A distressed property has serious problems — high vacancy, heavy deferred maintenance, financial trouble, owner facing foreclosure or estate settlement. Distressed doesn't automatically mean bad; it means opportunity. If you can fix the problem for less than the discount you're getting on price, you win. The danger is structural distress: bad location, no market demand. That's not fixable.

Deferred Maintenance

Deferred maintenance is the accumulated repairs an owner has put off — crumbling roads, aging electrical, broken amenities, peeling paint. Extremely common in mom-and-pop parks where the owner is coasting toward retirement. Every deferred maintenance item is negotiating leverage: get real contractor estimates during due diligence, then push the purchase price down by the repair cost.

Pro tip: Always inspect utility infrastructure. Underground pipes and electrical can look fine from the surface and be a disaster beneath. Budget a professional utility inspection on any park over $500k.

Infill (Filling Vacant Pads)

Infill is the strategy of filling existing vacant lots to generate lot rent income. Every empty lot is a zero-revenue asset costing you in taxes and maintenance. In an MHP, infill might mean bringing in used homes, setting them up, and renting to new residents. In an RV park, it means attracting monthly tenants to unused sites. It's often the highest-ROI improvement you can make.

Example: MHP with 15 vacant lots at $400/lot = $72,000/year in potential NOI you're not capturing. Fully infilled at an 8 cap = $900,000 in value creation.

Submetering

Submetering means installing individual meters on each lot so tenants pay for their own utilities instead of the park absorbing the cost. If you're currently paying $4,000/month in electricity and water for the whole park, converting to submetering shifts most of that to tenants — dramatically increasing NOI without raising lot rent. It's one of the most powerful operational improvements in MHP investing.

Example: 50 spaces billing back $60/month each = $3,000/month in recovered expenses = $36,000/year added to NOI. At an 8 cap, that's $450,000 in value — from one operational change.

Off-Market

Off-market deals are properties not publicly listed anywhere — no LoopNet, no broker, no yard sign. The owner hasn't decided to sell yet, or they'd rather sell quietly to avoid fees and public attention. Most of the best RV park and MHP deals happen off-market because serious operators find them before they're ever listed. Reactive investors compete for scraps; proactive ones build their own pipeline.

Over 90% of RV parks and MHPs are owned by independent operators with no succession plan. That's a massive off-market universe for investors willing to reach out directly.

Motivated Seller

A motivated seller has a reason to move quickly or accept flexible terms — retirement, health issues, estate settlement, financial pressure, partnership disputes, or just park fatigue after 30 years. Motivation is what creates deal-making flexibility: lower prices, seller financing, creative terms. Your job is to find out what they actually need, then solve for it.

Don't ask "why are you selling?" Ask "what does a good outcome look like for you?" Those answers tell you far more about how to structure the deal.

Direct-to-Owner

Direct-to-owner means bypassing brokers and reaching out to park owners yourself — before they've listed, before they've called a broker, before any other investor is in the conversation. No competition, no commission driving up price, and you set the tone of the relationship from the start. This is the core strategy for finding great deals that nobody else knows about.

Deal Flow

Deal flow is the steady stream of opportunities coming your way. Investors without deal flow are reactive — buying whatever happens to be listed. Investors with deal flow are selective — they see 20 deals to buy 1. Building deal flow means consistent outreach, relationships with operators and brokers, and a reputation as someone who actually closes. Volume creates the options that create great deals.

The math: if you need 50 conversations to find 1 deal and you want 2 parks this year, the call volume has to be there. It's a numbers game with relationship ROI layered on top.

Pocket Listing

A pocket listing is a property a broker has for sale but hasn't publicly marketed yet — it's "in their pocket." Brokers share these with their best buyer relationships before hitting the open market. Building real rapport with active RV park and MHP brokers means you sometimes hear about deals days or weeks before other investors do.

Driving for Dollars

Driving for dollars means physically driving through target markets to spot distressed or interesting properties that aren't on any list. For RV parks and MHPs, that means noting parks with visible vacancy, aging infrastructure, or signs of neglect. You research ownership and reach out directly. Old-school, but it still finds deals — especially in rural markets where data is sparse.

Skip Tracing

Skip tracing is the process of finding contact information for property owners — phone numbers, emails, mailing addresses — when it's not readily available. For RV park and MHP investors, skip tracing turns a park name or LLC entity into an actual phone conversation with the decision-maker. Modern data services make this fast; it used to take days, now it takes minutes.

LOI (Letter of Intent)

A letter of intent is a short, non-binding document outlining proposed deal terms before a full purchase contract. It covers price, financing structure, due diligence period, and major conditions. Both parties get aligned quickly without the legal cost of a full contract. If LOI terms work, you move to the purchase and sale agreement. It's how you lock in a deal without paying a lawyer for every exploratory conversation.

Keep your LOI simple. One page covering price, deposit, due diligence period, and closing timeline. Overcomplicating it signals inexperience and slows momentum.

Due Diligence

Due diligence is the investigative period after going under contract, before closing. You're verifying everything the seller told you: financials, leases, utility infrastructure, title, zoning, environmental, permits. It's your last chance to find problems and renegotiate if you find them. Don't rush it. Don't skip steps. No matter how excited you are about a deal.

MHP/RV park specific: Walk every lot to verify actual occupancy. Review utility billing records. Confirm zoning for current use. Check for pending regulatory issues or tenant complaints.

Earnest Money / Good Faith Deposit

Earnest money is a deposit you put down when going under contract to show you're serious. Typically 1-3% of purchase price, held in escrow. If you close, it credits toward purchase. If you back out for reasons not covered by your contingencies, the seller keeps it. During due diligence, most contracts let you walk with your deposit back — read your contingencies carefully before removing them.

On competitive deals, larger deposits signal strength. On motivated seller deals, smaller is fine — they just want confidence you'll actually close.

Proforma

A proforma is a financial projection showing what the property could earn once you've implemented your business plan — filled vacancies, raised rents, cut expenses, added revenue. It's future-state financials, not current-state actuals. Sellers use proformas to justify higher prices; buyers use them to model upside. Always underwrite on actuals first. Treat the proforma as a roadmap, not a promise.

The best proformas are conservative. Model what you can achieve in year 1-2 based on evidence. Optimistic projections feel great until you own the deal and reality hits differently.