---
name: MHP Acquisitions Expert
description: MHP acquisition, underwrite, cap rate, NOI, lot rent, deal analysis, due diligence, buy box, score this deal, IC memo, deal evaluation, purchase price, value-add, loss-to-lease, proforma, agency lending.
---

# MHP Acquisitions Expert

Comprehensive reference for manufactured housing community (MHC/MHP) acquisition analysis, underwriting, due diligence, deal scoring, and investment committee memo preparation. This skill consolidates Sunrise Communities' investment criteria, the Kevin Bupp Buy Box Scorecard v3.0, agency lending standards, and industry best practices into a single expert-grade reference document.

**Sources current as of:** March 2026. Cap rate data from SkyView Advisors Q3 2025 and NorthMarq H1 2025 reports. Agency lending terms from Fannie Mae/Freddie Mac published term sheets. Lot rent data from MobileHomeUniversity 2025 survey. FHFA manufactured housing price index data through Q2 2025. REIT operating benchmarks from Sun Communities, UMH Properties, and Equity LifeStyle Q3 2025 earnings.

**When to use this skill:** Any time a deal lands on the desk -- from initial screening through IC memo preparation. Also useful for portfolio-level analysis, market comp surveys, and investor reporting on acquisition pipeline.

---

## Table of Contents

1. [Sunrise Investment Criteria & Buy Box](#1-sunrise-investment-criteria--buy-box)
2. [Kevin Bupp Buy Box Scorecard v3.0](#2-kevin-bupp-buy-box-scorecard-v30)
3. [Underwriting Formulas & Calculations](#3-underwriting-formulas--calculations)
4. [Due Diligence Checklists](#4-due-diligence-checklists)
5. [Financing Options](#5-financing-options)
6. [Market Analysis Methodology](#6-market-analysis-methodology)
7. [Red Flags & Deal Killers](#7-red-flags--deal-killers)
8. [Decision Trees](#8-decision-trees)
9. [Common Gotchas](#9-common-gotchas)
10. [IC Memo Format](#10-ic-memo-format)
11. [Output Formats](#11-output-formats)
12. [References](#12-references)

---

## 1. Sunrise Investment Criteria & Buy Box

### 1.1 Hard Requirements

| Parameter | Requirement | Notes |
|-----------|-------------|-------|
| **Asset Type** | MHP or Parking | No RV parks without board approval |
| **Lot Count** | 50+ preferred, 30+ minimum | Scale efficiency threshold; <50 = limited upside |
| **Utilities** | City water/sewer preferred | Well/septic acceptable with reserves budgeted |
| **Location** | Within 60 min of MSA with 50k+ population | Demand driver access |
| **Entity Structure** | SCI [Property Name] MHP LLC | Standard SPE formation |

### 1.2 Target Metrics

| Metric | Target Range | Walk Away | Context |
|--------|-------------|-----------|---------|
| Cap Rate (Stabilized) | 7-9% | <6% | Current market compresses this; see 1.3 |
| Lot Rent vs Market | 20%+ below market | At or above market | Core value-add thesis |
| Occupancy | 80%+ | <70% | Infill below 80% = value-add upside |
| POH Ratio | <30% | >50% | Higher POH = 40-50% expense ratio |
| Infill Potential | Yes (preferred) | N/A | Vacant pads with infrastructure in place |

### 1.3 Current Market Context (2024-2026)

The MHP cap rate environment has shifted materially since 2022:

| Period | Average Cap Rate | Source |
|--------|-----------------|--------|
| H1 2024 | 7.5% | SkyView Advisors |
| Q3 2024 | 6.25-6.50% | SkyView Advisors |
| Q4 2024 | ~6.3% | NorthMarq |
| H1 2025 | 5.9% | NorthMarq (40 bps compression from Q4 2024) |

**Implication for Sunrise:** The 7-9% stabilized target remains the goal, but going-in caps of 4-6% are market reality for quality assets. The value-add model (buying at 4-6% in-place, stabilizing to 7-9%) is how Sunrise bridges this gap. Kevin Bupp's updated Buy Box reflects this shift -- see Section 2.

**National benchmarks:**
- National MHC occupancy: 94.9% (Q2 2025, NorthMarq)
- National average asking rent: $752/month (Q2 2025, up 7.0% YoY)
- National average lot rent: ~$400/month (wide range: $200-$800 by market)
- H1 2025 transaction volume: 66% above H1 2024 (HARRI5: $800M across 27 deals in 2025)
- UMH pipeline blended cap rate: 5.5% (Q3 2025 earnings call)

**REIT operating benchmarks (Q3 2025):**
- Sun Communities: 10.1% same-property MH NOI growth
- UMH Properties: 12.1% same-property NOI growth, 39.7% expense ratio (improved from 41.1%)
- Equity LifeStyle: 5.5% same-community rental income growth, 1.5% expense growth

### 1.4 Sunrise Value-Add Model

The investment thesis is straightforward:

```
1. ACQUIRE from mom-and-pop operators at below-market rents
2. RECAPTURE loss-to-lease via disciplined lot rent increases
3. REDUCE expenses through professional management, RUBS, and operational efficiency
4. FORCE APPRECIATION through NOI growth (income approach valuation)
5. EXIT or REFINANCE at higher valuation
```

**Key tension:** Balance "forever homes" for residents with "legacy wealth" for investors. Rent increases must be market-justified, phased appropriately, and compliant with state-specific rent increase notice requirements (see mhp-regulatory skill for state-by-state rules).

**Critical state-specific constraints (from regulatory skill):**
- MD: 10% rent cap for 3 years post-acquisition
- FL/MN/IL: 90-day rent increase notice (longest in Sunrise portfolio)
- MN: No admin/capital/distribution markup on utility billing

---

## 2. Kevin Bupp Buy Box Scorecard v3.0

### 2.1 Purpose

Screen and score MHP/parking acquisitions against Sunrise Capital criteria. This is a directional screening tool, not a rigid pass/fail system. Use scores to identify strengths, weaknesses, and areas requiring deeper investigation.

### 2.2 Scoring Approach

- **MHP Deals:** Score Sections A-D (max 100 points)
- **Parking Deals:** Score Section E only (max 100 points -- separate scoring system, not included here)
- Use scores directionally, not as absolute thresholds

---

### Section A: Market Fundamentals (25 points)

| Criteria | Points | Guidance |
|----------|--------|----------|
| **A1. Population Base** | 0-8 | |
| MSA 250k+ | 8 | Strong demand base |
| MSA 100k-250k | 5 | Acceptable with strong fundamentals |
| MSA 50k-100k | 2 | Requires deeper investigation |
| MSA <50k | 0 | Investigate: Why do people live here? |
| **A2. Demand Drivers** | 0-6 | |
| Multiple diverse employers | 6 | Healthcare, education, manufacturing, government |
| 2-3 solid employers | 4 | Some concentration risk |
| Single dominant employer | 1 | High risk -- one closure kills the market |
| **A3. Market Trajectory** | 0-6 | |
| Population/job growth | 6 | Growing markets preferred |
| Stable | 3 | Acceptable if fundamentals solid |
| Declining | 0 | Investigate cause; likely pass |
| **A4. Affordable Housing Demand** | 0-5 | |
| Strong rental market, housing shortage | 5 | Ideal -- limited supply of affordable alternatives |
| Moderate demand | 3 | Acceptable |
| Weak/oversupplied | 0 | Avoid |

**Scoring notes for A4:** The 1.5x spread test -- lot rent + home payment should be less than 67% of comparable apartment rent in the same market. If MHP all-in housing cost is not materially cheaper than renting an apartment, the affordability thesis weakens.

---

### Section B: Property Fundamentals (25 points)

| Criteria | Points | Guidance |
|----------|--------|----------|
| **B1. Infrastructure** | 0-10 | |
| Public water + public sewer | 10 | Ideal -- lowest OpEx, lowest risk |
| Public water + septic | 6 | Acceptable; budget $300-500/lot/year reserves |
| Well + septic | 3 | Higher risk; requires water quality testing and DEQ compliance |
| Lagoon system | 2 | **NOT auto-fail** if city sewer connection is feasible and budgeted |
| Orangeburg pipe | 0 | Major red flag -- replacement cost $5k-15k per lot |
| **B2. Occupancy** | 0-8 | |
| 90%+ occupied | 8 | Stable cash flow; limited infill upside |
| 75-89% occupied | 5 | Upside potential via infill |
| 50-74% occupied | 2 | Investigate why vacant; turnaround play |
| <50% occupied | 0 | High risk; requires deep investigation of cause |
| **B3. Home Ownership Mix** | 0-4 | |
| 80%+ TOH (tenant-owned homes) | 4 | Lower OpEx (30-35% expense ratio), stickier tenants |
| 50-79% TOH | 2 | Mixed; budget higher maintenance |
| <50% TOH (mostly POH) | 1 | Higher 40-50% expense ratio expected |
| **B4. Lot Count** | 0-3 | |
| 100+ lots | 3 | Scale efficiency; on-site manager justified |
| 50-99 lots | 2 | Acceptable; Sunrise sweet spot |
| <50 lots | 1 | Limited upside; management overhead percentage higher |

**Infrastructure cost benchmarks:**
- Sewer line replacement (clay/Orangeburg to PVC): $5,000-$15,000 per lot
- Water main replacement: $50-$150 per linear foot
- Road resurfacing: $2-$5 per square foot
- Lagoon-to-city-sewer connection: $500k-$2M+ depending on distance and municipality
- Well replacement: $15,000-$50,000 depending on depth

---

### Section C: Financial Structure (25 points)

| Criteria | Points | Guidance |
|----------|--------|----------|
| **C1. Path to Cash Flow** | 0-8 | |
| Day 1 cash flow positive | 8 | Ideal but rare in current market |
| CF within 12 months | 6 | Acceptable for value-add plays |
| CF within 24 months | 4 | **Kevin's current standard** |
| CF timeline >24 months | 0 | Requires exceptional upside to justify |
| **C2. Debt Structure** | 0-7 | |
| Fixed-rate debt available | 7 | **Required** |
| 5-year term | +0 | Current preference |
| Adjustable/floating rate | 0 | **Deal breaker** |
| **C3. Going-In LTV** | 0-5 | |
| 55% or below | 5 | Conservative; maximum safety margin |
| 56-65% | 3 | **Typical range** for Sunrise deals |
| 66-75% | 1 | Aggressive; limited room for error |
| >75% | 0 | Too leveraged |
| **C4. Going-In Cap Rate** | 0-5 | |
| 6%+ cap | 5 | Excellent (increasingly rare) |
| 5-6% cap | 3 | Good; market-consistent for quality assets |
| 4-5% cap | 2 | **Current market reality**; value-add must bridge to target |
| <4% cap | 0 | Requires exceptional value-add or pass |

---

### Section D: Seller & Deal Quality (25 points)

| Criteria | Points | Guidance |
|----------|--------|----------|
| **D1. Seller Type** | 0-6 | |
| Mom-and-pop, retiring | 6 | Ideal -- operational upside almost guaranteed |
| Institutional selling non-core | 4 | May be optimized already; less rent upside |
| Financial distress | 3 | Investigate cause; environmental/legal risk |
| Recently flipped (<3 yrs) | 1 | Limited remaining upside; seller may have cherry-picked |
| **D2. Rent Upside (Loss-to-Lease)** | 0-8 | |
| 30%+ below market | 8 | Major upside; core Sunrise thesis |
| 20-29% below market | 5 | Good upside; meets minimum target |
| 10-19% below market | 3 | Moderate upside; thinner margin for error |
| At or above market | 0 | Limited growth; commodity acquisition |
| **D3. Value-Add Opportunities** | 0-6 | |
| Multiple clear opportunities | 6 | RUBS, infill, amenities, expense reduction, POH conversion |
| 1-2 opportunities | 3 | Acceptable |
| None identified | 0 | Commodity asset; must win on yield alone |
| **D4. Deal Source** | 0-5 | |
| On-market (broker) | 5 | **80-90% of deals are on-market**; this is normal |
| Off-market direct | 4 | Good but rare; verify seller motivation |
| Auction/distress | 2 | Higher risk; compressed DD timelines |

---

### 2.3 Kevin's Key Buy Box Updates (December 2024)

| Old Criteria | Updated Criteria | Why |
|--------------|------------------|-----|
| Day 1 cash flow mandatory | Path to CF by 24 months OK | Cap rate compression makes Day 1 CF rare |
| 7%+ going-in cap | Now buying 4-5% caps | Market reality; value-add bridges the gap |
| 7+ year debt terms | 5-year terms preferred | Rate environment; shorter terms = lower spreads |
| Off-market preferred | 80-90% ON-market via brokers | Off-market volume is a myth for institutional buyers |
| Lagoon = auto-fail | NOT auto-fail if city sewer available | Connection cost vs. asset discount; case-by-case |

---

### 2.4 Deal Quality Score Interpretation

| Score | Rating | Action |
|-------|--------|--------|
| 80-100 | A - Strong Buy | Proceed aggressively; fast-track DD |
| 70-79 | B - Good | Pursue with standard due diligence |
| 60-69 | B- - Acceptable | Investigate concerns deeply before LOI |
| 50-59 | C - Marginal | Significant concerns; likely pass unless exceptional single factor |
| <50 | D/F - Pass | Do not pursue |

---

## 3. Underwriting Formulas & Calculations

### 3.1 Net Operating Income (NOI)

```
Gross Potential Rent (GPR)
  = Lot Rent × Total Leasable Lots × 12
  + POH Rent Premium × POH Units × 12  (if applicable)
  + Other Income (laundry, storage, late fees, application fees)

Effective Gross Income (EGI)
  = GPR
  - Vacancy & Collection Loss (use ACTUAL trailing 12-month or 10%, whichever is HIGHER)
  - Concessions

Net Operating Income (NOI)
  = EGI
  - Operating Expenses
  - Replacement Reserves ($250/lot/year for TOH; $500/unit/year for POH)
```

**Expense ratio benchmarks by home ownership mix:**

| Mix | Expected Expense Ratio | Notes |
|-----|----------------------|-------|
| 90%+ TOH | 30-35% | Lot rent model; lowest OpEx |
| 70-89% TOH | 35-40% | Mixed; some home maintenance |
| 50-69% TOH | 40-45% | Significant POH maintenance |
| <50% TOH | 45-55% | Home-heavy model; highest OpEx |

**REIT benchmarks (2025):** UMH Properties reported 39.7% expense ratio, improving from 41.1% prior year. This is for a predominantly TOH portfolio. Use this as a reasonable floor for institutional-quality management of a TOH-heavy community.

### 3.2 Cap Rate

```
Going-In Cap Rate = Year 1 NOI / Purchase Price
Stabilized Cap Rate = Stabilized NOI / Purchase Price
Exit Cap Rate = Projected NOI at Exit / Projected Sale Price
```

**Cap rate rules of thumb:**
- Apply 25-50 bps of cap rate expansion for exit assumptions (conservative)
- Private utilities: add 50-100 bps to required going-in cap
- Well/septic parks: add 75-100 bps to required going-in cap
- Parks <50 lots: add 25-50 bps (illiquidity premium)
- Declining MSA: add 50-100 bps (demand risk)

### 3.3 Loss-to-Lease (LTL) -- Revenue Upside

```
Annual LTL = (Market Rent - Current Rent) × Occupied Lots × 12

LTL as % of Current Revenue = Annual LTL / Current Annual Revenue

LTL Value Impact = Annual LTL / Exit Cap Rate
```

**Example:**
- Current rent: $350/month, Market rent: $475/month, 80 occupied lots
- Annual LTL = ($475 - $350) x 80 x 12 = $120,000
- At 7% exit cap: LTL Value Impact = $120,000 / 0.07 = $1,714,286 in created value

**Recapture timeline:** Typically 3-5 years to fully recapture LTL through phased rent increases of $25-$50/month per year. Faster recapture increases resident turnover risk. Slower recapture extends investor hold period.

**Recapture schedule modeling:**

```
Year 1: Increase $25-40/month (immediate post-close; "catching up")
Year 2: Increase $25-35/month (continued normalization)
Year 3: Increase $20-30/month (approaching market)
Year 4+: Increase 3-5% annually (maintain market position)
```

**State-specific constraints on recapture speed:**
- MD: 10% annual cap for 3 years post-acquisition (hard limit)
- FL/MN/IL: 90-day advance notice requirement (slows implementation)
- OR: Complex rent increase rules with notice requirements
- Always check mhp-regulatory skill for current state rules before modeling

### 3.4 Value-Add Potential

```
Stabilized Value = Stabilized NOI / Exit Cap Rate
Value Created = Stabilized Value - Purchase Price
Value-Add Multiple = Value Created / Total Equity Invested
```

**Sources of value creation:**
1. **Rent increases** (loss-to-lease recapture) -- largest contributor
2. **Occupancy gains** (infill vacant pads) -- second largest
3. **Expense reduction** (RUBS, renegotiated contracts, operational efficiency)
4. **Revenue additions** (storage, RV parking, laundry, vending)
5. **POH conversion** (sell POH to tenants; reduce expense ratio)
6. **Utility submetering/RUBS** (shift cost to tenants; improve NOI)

### 3.5 Cash-on-Cash Return (CoC)

```
Annual CoC = Annual Pre-Tax Cash Flow / Total Cash Invested

Where:
  Annual Pre-Tax Cash Flow = NOI - Annual Debt Service
  Total Cash Invested = Down Payment + Closing Costs + CapEx Reserves + Acquisition Costs
```

**Target returns:**
- Year 1 CoC: 6-10% (value-add deals; may be negative for heavy turnarounds)
- Stabilized CoC: 12-20% (after rent increases and expense optimization)
- Industry benchmark: 20% CoC is considered excellent for stabilized MHP

### 3.6 Internal Rate of Return (IRR)

```
IRR = discount rate that makes NPV of all cash flows = 0

Cash Flow Timeline:
  Year 0: -(Total Cash Invested)
  Year 1-N: Annual Pre-Tax Cash Flow (distributions)
  Year N: Cash Flow + Net Sale Proceeds (after debt payoff and selling costs)
```

**Target IRRs by deal type:**

| Deal Profile | Target IRR | Notes |
|-------------|-----------|-------|
| Stabilized, low-risk | 12-15% | Cash flow play; minimal value-add |
| Moderate value-add | 15-20% | Rent increases + some infill |
| Heavy value-add | 20-25%+ | Turnaround; higher risk/reward |

### 3.7 Debt Service Coverage Ratio (DSCR)

```
DSCR = NOI / Annual Debt Service

Where:
  Annual Debt Service = Monthly P&I Payment × 12
```

**Minimum thresholds:**
- Fannie Mae: 1.25x minimum DSCR
- Freddie Mac: 1.25x minimum DSCR
- CMBS/Conduit: 1.20x minimum
- Bridge lenders: 1.0x-1.10x (interest-only period)
- Sunrise internal target: 1.35x+ (conservative buffer)

### 3.8 Equity Waterfall Structure (Sunrise Standard)

```
Tier 1 (Return OF Capital):
  - 100% of distributions to LPs until capital returned

Tier 2 (Preferred Return):
  - [X]% preferred return to LPs (typically 6-8% cumulative)

Tier 3 (Return Split - Below IRR Hurdle):
  - [70/30] LP/GP split until IRR hurdle met

Tier 4 (Promote - Above IRR Hurdle):
  - [50/50] or [60/40] LP/GP split above hurdle
```

**Note:** Actual waterfall terms vary by deal and fund. Confirm with investor relations (Kate/Chiqui) for current fund terms before modeling.

### 3.9 Quick Underwriting Worksheet

Use this template for rapid deal screening before full underwriting:

```
QUICK UNDERWRITING: [Property Name]
Date: [Date]
Source: [Broker/Direct/Other]

PROPERTY BASICS
  Total Lots: ___    Occupied: ___    Occupancy: ___%
  TOH: ___    POH: ___    TOH%: ___%
  Current Lot Rent: $___/mo    Market Lot Rent: $___/mo
  Utilities: [City W/S | Well/Septic | Other]
  Asking Price: $___

INCOME (Annual)
  GPR:          $___  (lot rent × occupied × 12)
  + POH Income: $___
  + Other:      $___
  - Vacancy:    $___  (use actual or 10%)
  = EGI:        $___

EXPENSES
  Operating:    $___  (use __% of EGI)
  Reserves:     $___  ($250/lot × total lots)
  = Total:      $___

NOI
  Current:      $___
  Stabilized:   $___  (market rents, target occupancy, optimized expenses)

CAP RATES
  Going-In:     ___% (Current NOI / Ask)
  Stabilized:   ___% (Stab NOI / Ask)

LOSS-TO-LEASE
  Annual LTL:   $___
  LTL Value:    $___  (at ___% exit cap)

DEBT (assumed)
  Loan Amount:  $___  (at ___% LTV)
  Rate:         ___%  Term: ___ yrs  Amort: ___ yrs
  Annual DS:    $___
  DSCR:         ___x

EQUITY
  Down Payment: $___
  + Closing:    $___
  + CapEx:      $___
  = Total:      $___

RETURNS
  Year 1 CoC:   ___%
  Stabilized:   ___%
  Projected IRR: ___% (___-year hold)

SCORECARD: ___/100 (see Section 2)
RECOMMENDATION: [Pursue / Investigate / Pass]
```

---

## 4. Due Diligence Checklists

### 4.1 Financial Due Diligence

**Priority: Complete within first 2 weeks of DD period**

- [ ] **Tax returns** (3 years) -- verify reported income against P&L; watch for unreported cash income (common with mom-and-pop)
- [ ] **Profit & Loss statements** (3 years) -- compare to tax returns; flag discrepancies >5%
- [ ] **Rent roll** with move-in dates, lease terms, home types, and current rent per lot
- [ ] **Accounts receivable aging** -- delinquency >5% of gross revenue is a red flag
- [ ] **Bank statements** (12 months) -- verify deposits match reported income
- [ ] **Utility bills** (24 months) -- identify seasonal variation, trend, and cost per lot
- [ ] **Property tax bills** (3 years) -- confirm current assessment and project reassessment risk
- [ ] **Insurance policies** (current + claims history 5 years) -- verify coverage adequacy; check loss runs
- [ ] **Capital expenditure history** (3-5 years) -- what has been invested vs. deferred
- [ ] **Service contracts** -- landscaping, trash, pest control, management; check assignability and termination clauses
- [ ] **Management agreement** -- if third-party; review fees, term, termination
- [ ] **Home inventory** (if POH) -- VIN, year, make, model, condition, title status per home
- [ ] **Late fee and other income verification** -- confirm ancillary revenue is real and recurring
- [ ] **Debt schedule** -- existing liens, prepayment penalties, assumption eligibility

**Financial red flags:**
- Income reported on P&L doesn't match tax returns (>10% variance)
- Rent increases in last 6 months before sale (seller inflating NOI)
- Delinquency >10% of gross (collection problem or market problem)
- Insurance claims history shows repeated infrastructure failures
- No capital expenditures for 5+ years (deferred maintenance almost certain)

### 4.2 Physical Due Diligence

**Priority: Complete site visit within first week; engineering reports within 30 days**

#### Infrastructure Assessment

- [ ] **Water system inspection**
  - Public or private? If private well: water quality test, capacity test, permit status
  - Main line material, age, and condition (video inspection if >30 years old)
  - Service line material per lot (copper, galvanized, PEX, polybutylene)
  - Water pressure test at multiple points
  - Fire hydrant locations and condition
  - Backflow preventer status
  - Lead/copper testing if pre-1986 construction

- [ ] **Sewer system inspection**
  - Public, septic, lagoon, or private WWTP?
  - If public: confirm connection capacity and tap fees for infill
  - If septic: inspection per tank; drain field condition; available replacement area
  - If lagoon: regulatory compliance status; closure/conversion cost estimate
  - Main line video inspection (CCTV scope) -- **do not skip**
  - Identify pipe material: PVC (good), clay (fair), Orangeburg (replace), cast iron (inspect)
  - Manhole inspection for I&I (inflow and infiltration)
  - Lift station condition and maintenance records (if applicable)

- [ ] **Electrical system**
  - Individual meters per lot vs. master-metered
  - Pedestal condition and amperage (30A minimum; 50A preferred for newer homes)
  - Underground vs. overhead distribution
  - Transformer condition and utility ownership
  - Street lighting type and responsibility

- [ ] **Roads and drainage**
  - Paved, gravel, or dirt? Condition rating (1-5 scale)
  - Width adequate for emergency vehicle access?
  - Drainage swales, catch basins, culvert condition
  - Evidence of ponding, erosion, or flooding
  - ADA accessibility (required for common areas)

- [ ] **Geotechnical/drainage considerations**
  - Flood zone determination (FEMA FIRM map check)
  - If in SFHA: manufactured home elevation and anchoring requirements
  - Soil type and stability (expansive clay, fill, high water table)
  - Grading adequacy -- proper slope away from homes and pads
  - Storm water management system condition
  - Evidence of sinkholes (karst terrain in parts of FL, KY, TN, MO)
  - Retaining wall condition (if applicable)

#### Home and Site Assessment

- [ ] **Home condition survey** -- walk every occupied and vacant home; rate 1-5
- [ ] **Pad condition** -- level, proper tie-down anchors, skirting, steps
- [ ] **Vacant lot condition** -- infrastructure in place? Utility stubs? Ready for infill?
- [ ] **Common areas** -- clubhouse, playground, laundry, pool; condition and ADA compliance
- [ ] **Mailbox area** -- USPS compliance
- [ ] **Signage** -- condition, zoning compliance
- [ ] **Trees and vegetation** -- hazardous trees, root intrusion risk, maintenance cost
- [ ] **Fencing and boundaries** -- property line verification against survey

### 4.3 Environmental Due Diligence

**Priority: Phase I ordered within first week; Phase II if triggered**

#### Phase I Environmental Site Assessment (ESA)

Required by all institutional lenders and standard Sunrise practice. Must follow ASTM E1527-21 standard.

**What Phase I covers:**
- Historical use review (Sanborn maps, aerial photos, regulatory databases)
- Site reconnaissance (visual inspection for contamination indicators)
- Interviews with current/past owners and occupants
- Government records review (EPA, state DEQ databases)
- Identification of Recognized Environmental Conditions (RECs), Controlled RECs (CRECs), and Historical RECs (HRECs)

**Common MHP environmental concerns:**
- Former agricultural use (pesticides, herbicides, underground storage tanks for farm fuel)
- Adjacent property contamination (gas stations, dry cleaners, industrial sites)
- Heating oil underground storage tanks (USTs) -- common in older parks in Northeast/Midwest
- Asbestos in older manufactured homes (pre-1978)
- Lead paint in older homes and structures
- Illegal dumping on vacant lots or wooded areas
- Septic system contamination of groundwater
- Former landfill or fill material on site

**Cost:** $3,000-$6,000 for standard Phase I ESA

#### Phase II Environmental Site Assessment

Triggered when Phase I identifies RECs requiring further investigation.

**What Phase II covers:**
- Soil sampling and laboratory analysis
- Groundwater monitoring well installation and sampling
- UST detection (ground-penetrating radar)
- Asbestos/lead sampling of structures
- Vapor intrusion assessment (if warranted)

**Cost:** $10,000-$50,000+ depending on scope; can escalate significantly

**Decision framework:**
- Phase I clean with no RECs: Proceed
- Phase I with de minimis or historical RECs: Proceed with monitoring plan
- Phase I with significant RECs requiring Phase II: Pause acquisition; assess remediation cost
- Phase II reveals active contamination: Price reduction equal to remediation cost + 50% contingency, or walk

### 4.4 Legal Due Diligence

**Priority: Begin concurrent with financial DD; complete before closing**

#### Title and Survey

- [ ] **Title commitment** -- review all exceptions; negotiate removal of unacceptable items
- [ ] **ALTA survey** -- confirm boundaries, easements, encroachments, flood zone
  - MHP-specific: verify lot lines are consistent with rent roll/site plan
  - Check for utility easements that limit expansion
  - Identify access easements and confirm they run with the land
  - Look for prescriptive easement claims from neighbors
- [ ] **Title insurance** -- extended coverage (ALTA owner's policy); lender will require their own
- [ ] **Encumbrance review** -- liens, judgments, UCC filings
- [ ] **HOA/POA documents** (if applicable) -- rare for MHPs but check

#### Mobile Home Titling and Lien Search

**This is critical and frequently overlooked.** Each manufactured home has its own title, separate from the land.

- [ ] **Title search per home** -- verify ownership (resident vs. park)
  - State DMV/housing agency records (varies by state)
  - Each section of a multi-section home has its own title (double-wide = 2 titles)
- [ ] **Lien search per home** -- chattel liens from home lenders
  - Personal property (chattel) loans are common; homes may have outstanding liens
  - If park claims to own homes, verify titles are in park entity's name
- [ ] **VIN verification** -- match VIN on home to title document
- [ ] **HUD data plate** -- confirm year, manufacturer, thermal zone compliance
- [ ] **De-titling status** (if applicable) -- some states allow retirement of mobile home title when home becomes real property; check if this has been done for POH units

**State-specific titling quirks:**
- TX: Titles managed by TDHCA (Texas Department of Housing and Community Affairs)
- FL: Titles through DMV; can be converted to real property via RP affidavit
- CA: Titles through HCD (Department of Housing and Community Development)
- Most states: Titles through DMV or Secretary of State

#### Lease and Regulatory

- [ ] **Lease audit** -- terms, expiration dates, rent escalation clauses, assignability
  - Flag month-to-month vs. annual leases
  - Check for unusual provisions (options to purchase lots, rent caps, etc.)
  - Verify lease allows new owner to increase rent (some leases lock rates for term)
- [ ] **Zoning verification** -- confirm MHP is a permitted use (conforming or legal nonconforming)
  - Legal nonconforming: park predates current zoning; use is "grandfathered"
  - Key risk: nonconforming use may not allow expansion or rebuild after casualty
  - Check if municipality has adopted MHP-specific zoning protections
  - Verify maximum density (units/acre) supports current and planned lot count
- [ ] **Permit history** -- building permits, health dept, environmental permits
- [ ] **Operating licenses** -- state MHP operating license current and transferable
- [ ] **Litigation search** -- federal and state court; check all related parties
  - Resident lawsuits (habitability, discrimination, wrongful eviction)
  - Environmental enforcement actions
  - Code enforcement violations
  - ADA compliance complaints
- [ ] **Rent increase notice requirements** -- state and local rules
- [ ] **Tenant protection laws** -- right of first refusal, relocation assistance requirements
- [ ] **Property tax appeal status** -- is there a pending appeal by current owner?

### 4.5 Market Due Diligence

**Priority: Complete within first 2 weeks; feeds directly into underwriting assumptions**

- [ ] **Comparable lot rent survey** (see Section 6 for methodology)
  - Minimum 3 comps; target 5-7 for robust analysis
  - Document amenities, utilities included, home age restrictions at each comp
- [ ] **Apartment rent comparison** -- establish affordability spread
  - MHP total housing cost should be <67% of apartment rent (1.5x spread)
- [ ] **Local housing market analysis**
  - Median home price; price trend (3 years)
  - Rental vacancy rate
  - New construction pipeline (apartments and SFR)
- [ ] **Employment base analysis**
  - Top 10 employers; industry diversification
  - Unemployment rate vs. state/national
  - Major employer announcements (expansions, closures)
- [ ] **Population/demographic trends**
  - Census data: population change, median age, median income
  - Target: growing or stable population; median income supports lot rent
- [ ] **Competitive supply analysis**
  - Other MHPs within 10-mile radius: count, lot count, rents, occupancy
  - New MHP development planned? (extremely rare due to zoning barriers)
  - Available vacant lots in competing parks (infill competition)
- [ ] **School district quality** -- impacts family demand
- [ ] **Crime statistics** -- impacts insurance and desirability
- [ ] **Natural disaster exposure** -- hurricane, tornado, flood, wildfire zones

---

## 5. Financing Options

### 5.1 Agency Loans (Fannie Mae / Freddie Mac)

The preferred financing path for stabilized MHP acquisitions. Both GSEs have manufactured housing community lending programs with competitive terms.

#### Fannie Mae MHC Loans

| Parameter | Requirement |
|-----------|-------------|
| **Minimum Loan** | $750,000 |
| **Minimum Lot Count** | 50 pad sites |
| **Max LTV** | 80% purchase / 75% refinance |
| **Min DSCR** | 1.25x |
| **Terms** | 5, 7, 10, 12, 15, 20, 25, 30 years |
| **Amortization** | Up to 30 years |
| **Recourse** | Non-recourse (with standard carveouts) |
| **Rate Type** | Fixed (tied to US Treasury + spread of 2.20-2.60%) |
| **Assumable** | Yes (1% fee + lender underwriting fee) |
| **Prepayment** | Yield maintenance or defeasance |
| **Replacement Reserves** | $250/pad/year (TOH); higher for POH |
| **Third-Party Reports** | Appraisal, Phase I ESA, physical condition assessment |

**Fannie Mae-specific requirements:**
- SPE borrower entity required
- All homes must meet HUD Code Standards (Federal Manufactured Home Construction and Safety Standards Act of 1974)
- Borrower must demonstrate MHC operating experience
- Tenant lease terms reviewed for compliance
- Private wells and septic systems allowed with additional due diligence

#### Freddie Mac MHC Loans (Optigo)

| Parameter | Requirement |
|-----------|-------------|
| **Minimum Loan** | $1,000,000 |
| **Terms** | 5, 7, 10 years |
| **Amortization** | Up to 30 years |
| **Max LTV** | Up to 80% |
| **Recourse** | Non-recourse |
| **Rate Type** | Fixed |
| **Assumable** | Yes (1% fee to Freddie Mac + $5,000 underwriting fee to servicer) |
| **Application Fee** | $2,000 or 0.1% of loan amount (whichever is larger) |
| **Replacement Reserves** | $50/pad site/year; $250/rented manufactured home/year |
| **Timeline** | Commitment 45-60 days after application |

**Freddie Mac-specific requirements:**
- Must be existing communities (no new construction financing)
- Sponsor must have 2+ years MHC operating experience and own 1+ other MHC
- Leases cannot contain options to purchase pad site
- MHC Tenant Protections must be incorporated into leases within 12 months of origination
- No 55+/65+ age-restricted communities
- Seller/Servicer must have specific MHC financing experience (preferred)

**2026 FHFA caps:** Freddie Mac 2026 multifamily loan purchase cap set at $88 billion. At least 50% must be mission-driven, affordable housing. MHCs often qualify as mission-driven lending.

### 5.2 HUD/FHA Section 207(m)

Long-term, low-rate financing for construction or substantial rehabilitation of manufactured housing communities.

| Parameter | Requirement |
|-----------|-------------|
| **Eligible Activities** | Construction or substantial rehabilitation |
| **Minimum Community Size** | 5 spaces |
| **Max LTC** | 85% |
| **Min DSCR** | 1.176x |
| **Max Term** | 35 years |
| **Loan Limits** | $29,830/space (2024; 2025 TBD) |
| **Security** | GNMA Mortgage-Backed Securities eligible |
| **Non-Recourse** | Yes |

**Current status (as of 2025):** FHA is looking to restart Section 207(m), but volume has been extremely low -- no mortgages insured in FY2024. This program is theoretically available but practically difficult to access. Use as a financing option of last resort or for large-scale new community development.

### 5.3 Bridge/Hard Money Loans

For non-stabilized acquisitions or turnaround plays where agency financing is not immediately available.

| Parameter | Typical Terms |
|-----------|--------------|
| **Rates** | 30-day LIBOR/SOFR + 6.00% to 10.00% |
| **Terms** | 1-3 years (with extension options) |
| **LTV** | 65-80% |
| **DSCR** | 1.0x-1.10x (often interest-only) |
| **Recourse** | Full recourse (typically) |
| **Assumable** | No |
| **Use Case** | Lease-up period, major capex, path to agency refi |

**Bridge-to-agency strategy:**
1. Acquire with bridge financing at aggressive terms
2. Execute value-add plan (rent increases, infill, expense reduction)
3. Stabilize property (target 90%+ occupancy, DSCR >1.25x)
4. Refinance into agency permanent loan at 24-36 months
5. Risk: if stabilization takes longer than bridge term, extension or refinance risk

### 5.4 Seller Financing

Often the best financing option for mom-and-pop acquisitions. ~60% of MHPs in the US are owned by original developers from the 1960s-1970s.

| Parameter | Typical Terms |
|-----------|--------------|
| **Down Payment** | 0-20% (negotiable; typically 10-15%) |
| **Interest Rate** | 4-7% (negotiable; often 1-2% above agency rates) |
| **Term** | 5-10 years |
| **Amortization** | 20-30 years |
| **Recourse** | Non-recourse (negotiable) |
| **Assumable** | Usually yes |
| **Prepayment** | Often flexible or no penalty |

**Advantages of seller financing:**
- No credit check or institutional underwriting
- Faster close (no 45-60 day commitment process)
- Creative structuring (interest-only periods, stepped payments)
- Lower closing costs
- Seller may accept lower price for better terms (or vice versa)
- Can close deals that don't qualify for agency financing

**Seller financing structures:**

1. **Standard carry-back:** Seller holds first-position note; buyer makes monthly payments
2. **Master lease with option:** Buyer operates property under lease; option to purchase at set price during term. Good for turnaround plays with unproven cash flow
3. **Wrap-around mortgage:** Seller's existing mortgage stays in place; buyer's note "wraps" around it. Seller collects from buyer, pays their mortgage. Risk: due-on-sale clause violation
4. **Hybrid:** Partial bank financing + seller second. Common structure: 60-65% bank first + 15-20% seller second + 15-20% buyer equity

**Seller financing negotiation tips:**
- Emphasize tax benefits of installment sale to seller (defer capital gains)
- Offer higher price in exchange for better terms
- Build in interest-only period for first 12-24 months (cash flow runway)
- Include assumption clause for future sale
- Negotiate personal guarantee burn-off at DSCR threshold

### 5.5 CMBS/Conduit Loans

| Parameter | Typical Terms |
|-----------|--------------|
| **Minimum Loan** | $2-5M |
| **Max LTV** | 75% |
| **Min DSCR** | 1.20x |
| **Terms** | 5, 7, 10 years |
| **Amortization** | 25-30 years |
| **Rate Type** | Fixed |
| **Recourse** | Non-recourse |
| **Prepayment** | Yield maintenance or defeasance |

**CMBS considerations for MHP:** Less favorable than agency for most deals due to higher spreads and less flexible underwriting. Consider only when agency financing is unavailable or CMBS offers meaningfully better execution.

### 5.6 SPE Covenant Requirements (All Institutional Lending)

All agency and CMBS lenders require SPE borrower entities. Sunrise standard: **SCI [Property Name] MHP LLC**.

**Standard SPE covenants:**
- Separate TIN/EIN for the entity
- Separate bank accounts (no commingling)
- Cannot guarantee obligations of other entities
- Cannot mix assets with other entities
- Must maintain separate financial records
- Must hold itself out as a separate entity
- Requires independent director/manager for voluntary bankruptcy consent (typically for loans >$20M)
- Entity formed solely to own and operate the collateral property
- Must remain solvent and adequately capitalized
- Cannot amend organizational documents without lender consent

**Sunrise entity structure:**
```
Sunrise Capital Investors (parent)
  └── SCI [Property Name] MHP LLC (SPE borrower)
        └── Owns and operates the single MHP asset
```

---

## 6. Market Analysis Methodology

### 6.1 Comparable Lot Rent Survey

The comp survey is the foundation of the value-add thesis. A weak comp survey = a weak underwriting.

**Step 1: Identify Comps**
- Search for all MHPs within 10-mile radius (20-mile in rural markets)
- Minimum 3 comps; target 5-7
- Sources: MHVillage, DataComp/JLT, county assessor, Google Maps, cold calling

**Step 2: Gather Data Per Comp**

| Data Point | Why It Matters |
|-----------|----------------|
| Community name and address | Location context |
| Number of lots / occupied lots | Scale comparison |
| Current lot rent | Primary data point |
| What's included in rent | Water, sewer, trash, cable? Adjust for apple-to-apple |
| Home age restrictions | Some parks restrict to homes <10 or <15 years old |
| Pet policy and fees | Impacts desirability |
| Amenities | Pool, clubhouse, playground -- justify rent premium |
| Infrastructure type | City W/S vs. private; impacts comp quality |
| Ownership type | Institutional vs. mom-and-pop; impacts pricing behavior |
| Recent rent increases | Trend direction |

**Step 3: Normalize Rents**

Adjust all comp rents to an "apples-to-apples" basis:

```
Adjusted Rent = Base Lot Rent
  + Water/Sewer charge (if billed separately at comps but included at subject)
  + Trash charge (if billed separately at comps but included at subject)
  - Any amenity premium adjustment (pool, clubhouse)
  ± Age/condition quality adjustment
```

**Step 4: Establish Market Rent**

- Calculate median and average of adjusted comp rents
- Weight more heavily toward comps with similar infrastructure and scale
- Market rent = weighted average of adjusted comp rents
- Discount 5-10% if subject is materially inferior (private utilities, poor roads)
- Premium 5-10% if subject has superior amenities or location

**Step 5: Validate with Affordability Test**

```
Market Rent Validation:
  Average 2BR apartment rent in market: $___/month
  MHP total housing cost (lot rent + home payment): $___/month
  Spread: ___% discount to apartment

  If spread < 33% (1.5x): Lot rent may be at ceiling
  If spread 33-50%: Healthy room for increases
  If spread > 50%: Significant room for increases
```

### 6.2 Demand Analysis

#### Employment Base

- Identify top 10 employers (data sources: local chamber of commerce, state labor dept)
- Calculate Herfindahl-Hirschman Index (HHI) for employer concentration:
  ```
  HHI = Sum of (% of total employment per employer)^2
  HHI < 1,500: Not concentrated (good)
  HHI 1,500-2,500: Moderately concentrated
  HHI > 2,500: Highly concentrated (risk)
  ```
- Check for recent or announced: plant closures, layoffs, expansions, new employers
- Verify unemployment rate vs. state and national benchmarks

#### Population Trends

- Census Bureau: population change (2020 to latest ACS estimate)
- Population growth rate: positive is strongly preferred
- Median household income: must support lot rent + home payment at <30% of income
- Age distribution: strong 25-55 working-age cohort supports demand
- In-migration vs. out-migration patterns

#### Housing Supply

- Existing MHP inventory within 10-20 mile radius
- New MHP development pipeline (extremely rare due to zoning barriers nationwide -- half of the 50 largest MSAs prohibit new MHP placement in their zoning ordinances)
- Apartment pipeline (new multifamily construction)
- SFR new construction and pricing
- Available lot inventory at competing parks

### 6.3 National Lot Rent Benchmarks (2025)

| Region / State | Average Lot Rent | Range | Notes |
|---------------|-----------------|-------|-------|
| National Average | ~$400/month | $200-$800 | Wide variation |
| California | $500-$600+ | $400-$1,200 | Rent control in some jurisdictions |
| Florida | $400-$600 | $300-$900 | Age-restricted communities higher |
| Texas | $350-$500 | $250-$650 | Wide range by MSA |
| Midwest (OH, IN, MI) | $300-$400 | $200-$500 | Sunrise core markets |
| Southeast (NC, SC, GA) | $300-$450 | $250-$550 | Growing markets |
| Northeast | $400-$600 | $300-$800 | Tighter supply |
| Iowa | $200-$300 | $140-$400 | Lower cost of living |
| Pacific Northwest | $450-$600 | $350-$750 | Tight housing markets |

**National asking rent trend:** $752/month national average as of Q2 2025 (NorthMarq), up 7.0% YoY. This includes home rents, not just lot rents. Pure lot rent averages are lower.

**FHFA manufactured housing price appreciation:** From Q1 2000 to Q2 2025, manufactured homes appreciated 219.1% -- nearly identical to site-built homes (219.9%). In the past decade, manufactured homes have seen higher YoY appreciation than site-built homes in nearly every quarter.

---

## 7. Red Flags & Deal Killers

### 7.1 Absolute Deal Killers

These should result in an immediate pass absent extraordinary circumstances:

| Red Flag | Why It Kills | Exception |
|----------|-------------|-----------|
| **Active environmental contamination** | Remediation cost uncertain; lender won't finance | Only if seller remediates pre-close with escrow |
| **Orangeburg pipe throughout** | Replacement cost of $5-15k/lot will exceed value-add | If deeply discounted and budgeted |
| **Floating/variable rate only** | Interest rate risk in rising rate environment | None for Sunrise |
| **>50% POH with no conversion plan** | 45-55% expense ratio; cash flow trap | Only if homes are newer and marketable for sale |
| **Zoning doesn't permit MHP use** | Illegal operation; no lender will finance | Only if re-zoning is achievable and underway |
| **Single employer >50% of local jobs** | One closure = economic death spiral | Only if employer is government/university/hospital |
| **Declining population >10% over 10 years** | Demand erosion; occupancy will decline | None |
| **Seller refuses to provide financials** | What are they hiding? | None -- walk |
| **No legal access to property** | Landlocked or disputed easement | Only if access can be secured before close |

### 7.2 Serious Red Flags (Investigate Deeply)

| Red Flag | Investigation Required | Mitigation |
|----------|----------------------|------------|
| Lagoon sewer system | Cost to connect to city sewer; distance to main; municipal willingness | Price discount = connection cost + 50% contingency |
| Well water system | Water quality test; capacity test; permit status; backup plan | Budget $15-50k well replacement reserve |
| Septic systems (individual) | Inspect each; verify drain field replacement space | Budget $5-10k per system potential replacement |
| Occupancy <75% | Why vacant? Market problem or management problem? | Verify demand exists; model conservative infill timeline |
| Turnover >20%/year | Resident satisfaction issue? Market issue? Management issue? | Survey residents; review turnover causes |
| Rent increases in last 6 months | Seller inflating NOI pre-sale | Underwrite to pre-increase rents; verify with bank deposits |
| Master-metered utilities with no submetering | Expense drag; RUBS implementation complexity | Budget submetering capital ($500-1,500/lot) |
| Property in flood zone (SFHA) | Insurance cost; FEMA compliance; home anchoring requirements | Verify insurance cost; manufactured home elevation requirements |
| Deferred maintenance visible | Infrastructure costs below the surface are likely worse | Budget 150-200% of visible deferred maintenance |
| No rent roll or unreliable records | Impossible to verify income | Reconstruct from bank deposits; high-risk premium |
| Recent or pending litigation | Financial exposure; management distraction | Legal review; escrow for potential liability |
| Non-conforming zoning (grandfathered) | Cannot expand; may not rebuild after casualty | Confirm zoning letter from municipality |
| High POH ratio (30-50%) | Elevated expenses; conversion program needed | Model POH sale program; budget renovation costs |

### 7.3 Yellow Flags (Monitor but Not Disqualifying)

| Yellow Flag | What to Watch |
|-------------|---------------|
| Park is 100% occupied | No infill upside; limited growth unless rent upside exists |
| All month-to-month leases | Flexibility cuts both ways; residents can leave quickly |
| Recent ownership change (<3 years) | Previous buyer may have captured easy value-add |
| Park-adjacent land for sale | Could be a competitor or expansion opportunity |
| Small lot count (30-49) | Management overhead % higher; limited scale |
| Age-restricted community | Shrinking demographic; Freddie Mac excludes 55+/65+ |
| Residents on fixed income (70%+) | Limits rent increase aggressiveness; social pressure |
| Strong tenant association | May resist rent increases; political/media risk |

---

## 8. Decision Trees

### 8.1 Pursue / Pass / Investigate

```
START: New deal arrives
  │
  ├── Does it meet hard requirements? (50+ lots, 60 min of 50k MSA, legal MHP use)
  │     ├── NO → PASS (don't waste time)
  │     └── YES ↓
  │
  ├── Any absolute deal killers? (Section 7.1)
  │     ├── YES → PASS
  │     └── NO ↓
  │
  ├── Run Buy Box Scorecard (Section 2)
  │     ├── Score <50 → PASS
  │     ├── Score 50-69 → INVESTIGATE (address specific concerns)
  │     └── Score 70+ ↓
  │
  ├── Quick underwrite passes? (Section 3.9)
  │     ├── Stabilized cap <6% → PASS (unless exceptional story)
  │     ├── LTL <10% → WEAK (limited value-add; need other drivers)
  │     └── Stabilized cap 7%+, LTL 20%+ → PURSUE ↓
  │
  ├── LOI submission
  │     └── Enter full due diligence (Section 4)
  │
  └── DD complete → IC Memo (Section 10) → Investment Committee Decision
```

### 8.2 Infrastructure Risk Assessment

```
UTILITY ASSESSMENT
  │
  ├── PUBLIC WATER + PUBLIC SEWER
  │     └── LOW RISK → Standard DD; no premium required
  │
  ├── PUBLIC WATER + SEPTIC
  │     ├── Individual septic per home
  │     │     ├── Inspect each system
  │     │     ├── Verify drain field replacement space
  │     │     └── Budget $300-500/lot/year reserves
  │     └── MODERATE RISK → Add 50 bps to required cap rate
  │
  ├── PRIVATE WELL + SEPTIC
  │     ├── Water quality test (bacteria, nitrates, heavy metals)
  │     ├── Capacity test (gallons per minute)
  │     ├── DEQ permit status
  │     ├── Backup water source available?
  │     └── HIGH RISK → Add 75-100 bps to required cap rate
  │
  ├── LAGOON SYSTEM
  │     ├── Is city sewer connection feasible?
  │     │     ├── YES → Cost estimate for connection
  │     │     │     ├── <$500k → PROCEED with price adjustment
  │     │     │     ├── $500k-$1M → NEGOTIATE hard; build into price
  │     │     │     └── >$1M → LIKELY PASS unless asset is exceptional
  │     │     └── NO → HIGH RISK
  │     ├── Current regulatory compliance status?
  │     ├── Remaining permitted capacity?
  │     └── HIGHEST NON-KILLER RISK → Add 100-150 bps to required cap rate
  │
  └── ORANGEBURG PIPE / GALVANIZED STEEL WATER MAINS
        ├── Full replacement required
        ├── Cost: $5-15k per lot (sewer) / $50-150 per LF (water main)
        ├── If replacement cost > 15% of purchase price → LIKELY PASS
        └── DEAL KILLER if systemic and not priced in
```

### 8.3 Seller Type Analysis

```
SELLER TYPE ASSESSMENT
  │
  ├── MOM-AND-POP (RETIRING)
  │     ├── HIGHEST VALUE-ADD POTENTIAL
  │     ├── Likely characteristics:
  │     │     ├── Below-market rents (haven't raised in years)
  │     │     ├── Cash income not fully reported (tax return gap)
  │     │     ├── Deferred maintenance (visual inspection critical)
  │     │     ├── No RUBS or submetering
  │     │     ├── POH with unclear titles
  │     │     ├── Handshake leases or month-to-month
  │     │     └── Willing to carry financing (tax deferral motivation)
  │     ├── DD focus: Infrastructure condition, home titling, lease formalization
  │     └── STRONG PURSUE
  │
  ├── INSTITUTIONAL (SELLING NON-CORE)
  │     ├── MODERATE VALUE-ADD POTENTIAL
  │     ├── Likely characteristics:
  │     │     ├── Rents closer to market (professional management)
  │     │     ├── Clean financials and records
  │     │     ├── Maintenance current or documented deferred
  │     │     ├── RUBS or submetering already in place
  │     │     └── Formal leases
  │     ├── DD focus: Why selling? Market issues? Portfolio rebalancing?
  │     └── PURSUE IF METRICS WORK
  │
  ├── FINANCIAL DISTRESS
  │     ├── VARIABLE VALUE-ADD POTENTIAL
  │     ├── Key questions:
  │     │     ├── Is distress financial (overleveraged) or operational (mismanaged)?
  │     │     ├── Are there liens, judgments, or environmental issues causing distress?
  │     │     ├── Is the property in receivership?
  │     │     └── Compressed DD timeline; may need to move fast
  │     ├── DD focus: Lien search, environmental, infrastructure condition
  │     └── INVESTIGATE CAUTIOUSLY
  │
  └── RECENTLY FLIPPED (<3 YEARS)
        ├── LOW VALUE-ADD POTENTIAL
        ├── Key questions:
        │     ├── What value-add did previous buyer capture?
        │     ├── Why selling so soon? (Problem they couldn't solve?)
        │     ├── Is remaining upside sufficient for Sunrise return targets?
        │     └── Verify rent increases weren't too aggressive (turnover risk)
        ├── DD focus: Resident satisfaction, remaining LTL, infrastructure condition
        └── LIKELY PASS unless clear remaining upside
```

---

## 9. Common Gotchas

Lessons from actual deal experience and industry best practices. These are the mistakes that cost real money.

### 9.1 Financial Gotchas

| Gotcha | What Happens | How to Catch It |
|--------|-------------|-----------------|
| **Seller inflates NOI pre-sale** | Rent increases 3-6 months before listing; expenses deferred | Compare 24-month rent history to current rent roll; verify with bank deposits |
| **Unreported cash income** | P&L shows higher income than tax returns | Underwrite to tax return income, not P&L; bank deposits are ground truth |
| **Property tax reassessment** | Acquisition triggers reassessment to purchase price | Research recent comparable sales and their post-sale assessments on assessor website |
| **Insurance cost spike post-acquisition** | New owner faces higher premiums; prior owner had long-standing relationship | Get insurance quotes DURING DD, not after close |
| **Delinquency masked by late fee income** | High late fees make total income look stable but signal collection problems | Review AR aging separately; late fees >5% of revenue = red flag |
| **Pro forma vs. actual expenses** | Broker OM uses "market" expense ratios, not actual | Always underwrite to actual T12 expenses; add 5-10% buffer for items seller wasn't spending on |
| **Home rental income attributed to lot rent** | POH rental income makes "lot rent" look higher than it is | Separate lot rent from home rent in rent roll analysis |
| **Utility expense surprises** | Master-metered utilities with no RUBS = owner paying full cost | Model RUBS implementation timeline; budget 6-12 months to fully implement |

### 9.2 Physical Gotchas

| Gotcha | What Happens | How to Catch It |
|--------|-------------|-----------------|
| **Underground utilities worse than surface suggests** | Beautiful park above ground; failing pipes below | CCTV sewer camera ($3-5k); never skip this |
| **Vacant lots have no infrastructure** | Counted as "infill opportunity" but need $10-20k per lot to develop | Walk every vacant lot; verify utility stubs exist |
| **Tree root infiltration** | Roots cracking sewer lines and blocking flow | Included in CCTV scope; also observe large trees near sewer mains |
| **Electrical system undersized** | 30A pedestals can't handle modern AC units; no 50A service | Inspect random sample of pedestals; check utility records for capacity |
| **Road condition deterioration** | Looks OK in summer; potholes and flooding in spring | Visit during/after rain if possible; check drainage patterns |
| **Flood zone encroachment** | Part of property in flood zone; not disclosed upfront | Order ALTA survey with flood cert; check FEMA FIRM maps |
| **Home anchoring non-compliance** | Homes not properly tied down per HUD/state requirements | Spot-check anchoring systems; especially important in wind zones |
| **Septic drain field under homes or parking** | No room to replace when system fails; must remove homes | Verify drain field locations against site plan |

### 9.3 Legal Gotchas

| Gotcha | What Happens | How to Catch It |
|--------|-------------|-----------------|
| **Grandfathered zoning doesn't survive casualty** | Fire or storm destroys homes; city won't permit replacement | Get written confirmation from zoning department on rebuild rights |
| **Leases lock in rent for term** | Residents have multi-year leases at fixed rents | Read every lease; model actual rent increase timeline |
| **Homes titled to wrong entity** | Park claims to own POH but titles are in previous owner's personal name | Run title search on every POH VIN through state DMV/housing agency |
| **Easements limit expansion** | Utility easement crosses vacant lots planned for infill | Survey review; locate all easements on site plan |
| **Right of first refusal** | State law or existing leases give residents right to match purchase offer | Check state law AND lease language; this can delay or kill closing |
| **Pending code violations** | City has open enforcement cases on property | Check with code enforcement department directly during DD |
| **HOA or community restrictions** | Adjacent residential HOA has restrictions affecting MHP | Title search will reveal restrictive covenants |
| **Mobile home title issues for multi-section homes** | Double-wide has 2 titles; triple-wide has 3; one may be missing or have a lien | Search EACH section VIN separately |

### 9.4 Market Gotchas

| Gotcha | What Happens | How to Catch It |
|--------|-------------|-----------------|
| **Comp rents include utilities** | Subject's "below market" rent looks worse than it is after normalization | Always adjust comps to base lot rent (exclude bundled utilities) |
| **Nearby employer closing** | Major employer announces closure after LOI but before close | Google News alerts; local chamber of commerce check; employment trend analysis |
| **New apartment construction** | 300-unit apartment complex breaks ground nearby; compresses demand | Check building permits; planning commission agendas |
| **Rent increase backlash** | Aggressive increases generate media attention, city council action | Research local political environment; phase increases over 3-5 years |
| **Seasonal occupancy** | Parks near seasonal employment (agriculture, tourism) show artificially high occupancy when toured | Review 12-month occupancy history; tour in off-season if possible |

---

## 10. IC Memo Format

### 10.1 Sunrise Standard IC Memo Structure

The Investment Committee memo follows a standardized format. Every acquisition presented to IC must include these sections.

```
=====================================================
INVESTMENT COMMITTEE MEMORANDUM

Property: [Name]
Location: [City, State]
Date: [Date]
Prepared By: [Name]
Entity: SCI [Property Name] MHP LLC

=====================================================

1. EXECUTIVE SUMMARY
   - Property overview (lots, occupancy, infrastructure, condition)
   - Asking price and proposed offer
   - Going-in cap rate / stabilized cap rate
   - Investment thesis in 2-3 sentences
   - Recommendation: Pursue at $X / Pass / Need More Info

2. DEAL QUALITY SCORECARD
   [Full Buy Box Scorecard from Section 2]
   Total Score: XX/100
   Rating: [A/B/C/D]

3. PROPERTY DESCRIPTION
   - Location and market context
   - Physical description (lots, homes, infrastructure, amenities)
   - Utilities (water, sewer, electric, gas)
   - Home inventory (if POH: count, year, make, condition)
   - Site plan / aerial photo
   - Zoning status (conforming, legal nonconforming, conditional use)

4. FINANCIAL ANALYSIS
   a. Current Operations
      - T12 Income Statement
      - Current rent roll summary
      - Occupancy trend (24 months)
      - Expense breakdown with per-lot metrics

   b. Underwriting
      - Year 1 through Year 5 pro forma
      - NOI bridge: current → stabilized
      - Key assumptions table (rent growth, expense growth, vacancy, capex)
      - Sensitivity analysis (cap rate, rent growth, occupancy)

   c. Returns Analysis
      - Cash-on-cash by year
      - IRR (5-year and 7-year hold)
      - Equity multiple
      - Waterfall distribution schedule

5. VALUE-ADD OPPORTUNITY
   a. Loss-to-Lease Analysis
      - Current rent vs. market (with comp survey)
      - Phased rent increase schedule
      - Revenue impact by year

   b. Occupancy Upside
      - Vacant lots with infrastructure
      - Infill cost per lot
      - Absorption rate assumption

   c. Expense Optimization
      - RUBS/submetering opportunity
      - Contract renegotiation
      - Management efficiency gains

   d. Other Value Drivers
      - POH conversion program
      - Ancillary revenue (storage, RV parking)
      - Amenity improvements

6. MARKET ANALYSIS
   - MSA demographics and employment
   - Comparable lot rent survey (Section 6.1 methodology)
   - Affordability analysis (1.5x spread test)
   - Supply/demand dynamics
   - Growth indicators

7. FINANCING
   - Proposed debt structure
   - Lender identified / terms quoted
   - LTV, DSCR, debt yield metrics
   - Refinance assumptions (if bridge)

8. RISK ASSESSMENT
   - Risk matrix (probability × impact)
   - Key risks with specific mitigation strategies
   - Regulatory considerations (state-specific)
   - Environmental summary (Phase I findings)
   - Insurance considerations

9. DUE DILIGENCE STATUS
   - Completed items (with findings)
   - Outstanding items (with timeline)
   - Third-party reports ordered/received

10. RECOMMENDATION
    - Investment thesis recap
    - Key strengths (top 3)
    - Key risks (top 3)
    - Recommended action and terms
    - Conditions to close

APPENDICES
  A. Rent roll
  B. T12 financials
  C. Comparable rent survey
  D. Site plan / aerials
  E. Phase I executive summary
  F. Property photos
  G. Financing term sheet

=====================================================
```

### 10.2 Risk Matrix Template

| Risk | Probability | Impact | Severity | Mitigation |
|------|------------|--------|----------|------------|
| Property tax reassessment | High | Moderate | HIGH | Budget for full reassessment to purchase price |
| Infrastructure repair beyond estimates | Moderate | High | HIGH | Reserve 150% of estimated repair cost |
| Slower-than-projected rent increases | Moderate | Moderate | MODERATE | Conservative Year 1 assumptions; phase increases |
| Occupancy decline during transition | Low-Moderate | Moderate | MODERATE | Resident retention program; communication plan |
| Environmental issue discovered post-close | Low | High | MODERATE | Phase I/II complete; representations in PSA |
| Interest rate increase on refinance | Moderate | Moderate | MODERATE | Lock rate early; fixed-rate preference |
| Regulatory change (rent control) | Low | High | MODERATE | Monitor state legislation; diversify geographically |
| Natural disaster | Low | Very High | MODERATE | Adequate insurance; FEMA compliance |

---

## 11. Output Formats

### 11.1 Deal Quality Scorecard

```markdown
## DEAL QUALITY SCORECARD: [Property Name]
**Location:** [City, State]
**Date:** [Date]

### Score Summary
| Section | Score | Max | Key Factor |
|---------|-------|-----|------------|
| A. Market Fundamentals | X | 25 | [strongest/weakest element] |
| B. Property Fundamentals | X | 25 | [strongest/weakest element] |
| C. Financial Structure | X | 25 | [strongest/weakest element] |
| D. Seller & Deal Quality | X | 25 | [strongest/weakest element] |
| **TOTAL** | **XX** | **100** | |

**Rating:** [A/B/B-/C/D/F]
**Recommendation:** [Proceed Aggressively / Pursue with DD / Investigate / Pass]

### Key Strengths
1. [Strength 1 - specific and quantified]
2. [Strength 2 - specific and quantified]
3. [Strength 3 - specific and quantified]

### Key Concerns
1. [Concern 1 - with specific investigation needed]
2. [Concern 2 - with specific investigation needed]

### Required Due Diligence
- [ ] [DD item 1 with timeline and cost estimate]
- [ ] [DD item 2 with timeline and cost estimate]
- [ ] [DD item 3 with timeline and cost estimate]

### Quick Financial Summary
| Metric | Current | Stabilized |
|--------|---------|------------|
| NOI | $XXX,XXX | $XXX,XXX |
| Cap Rate | X.X% | X.X% |
| Lot Rent | $XXX | $XXX (market) |
| Loss-to-Lease | $XXX,XXX/year | |
| Occupancy | XX% | XX% |
```

### 11.2 Underwriting Summary

```markdown
## UNDERWRITING SUMMARY: [Property Name]
**Date:** [Date] | **Analyst:** [Name]
**Confidence Level:** [HIGH / MODERATE / LOW]

### Property Overview
| Parameter | Value |
|-----------|-------|
| Lots (Total/Occupied) | XXX / XXX (XX%) |
| TOH/POH Split | XX / XX (XX% TOH) |
| Current Lot Rent | $XXX/month |
| Market Lot Rent | $XXX/month |
| Infrastructure | [City W/S / Well/Septic / Other] |
| Asking Price | $X,XXX,XXX |
| Price Per Lot | $XX,XXX |

### Financial Summary
| Metric | Current | Year 1 | Year 3 | Year 5 (Stab) |
|--------|---------|--------|--------|----------------|
| Revenue | $XXX | $XXX | $XXX | $XXX |
| Expenses | $XXX | $XXX | $XXX | $XXX |
| Expense Ratio | XX% | XX% | XX% | XX% |
| NOI | $XXX | $XXX | $XXX | $XXX |
| Cap Rate | X.X% | X.X% | X.X% | X.X% |
| CoC Return | — | X.X% | XX.X% | XX.X% |
| DSCR | X.Xx | X.Xx | X.Xx | X.Xx |

### Returns Analysis
| Metric | 5-Year Hold | 7-Year Hold |
|--------|------------|------------|
| IRR | XX.X% | XX.X% |
| Equity Multiple | X.Xx | X.Xx |
| Total Distributions | $X,XXX,XXX | $X,XXX,XXX |

### Value-Add Bridge
| Source | Annual NOI Impact | Value Impact (@X% cap) |
|--------|------------------|----------------------|
| Rent Increases (LTL) | $XXX,XXX | $X,XXX,XXX |
| Occupancy Gain | $XX,XXX | $XXX,XXX |
| RUBS Implementation | $XX,XXX | $XXX,XXX |
| Expense Reduction | $XX,XXX | $XXX,XXX |
| **Total Value Created** | **$XXX,XXX** | **$X,XXX,XXX** |

### Sensitivity Analysis
| Scenario | NOI | Cap Rate | Value | IRR |
|----------|-----|----------|-------|-----|
| Base Case | $XXX | X.X% | $X.XM | XX% |
| Upside (+10% rent) | $XXX | X.X% | $X.XM | XX% |
| Downside (-10% occ) | $XXX | X.X% | $X.XM | XX% |
| Stress (both) | $XXX | X.X% | $X.XM | XX% |
```

### 11.3 Due Diligence Tracker

```markdown
## DD TRACKER: [Property Name]
**DD Period:** [Start] to [End] (XX days)
**Status:** [Active / Complete / Extended]

### Financial DD
| Item | Status | Assigned | Due | Findings |
|------|--------|----------|-----|----------|
| Tax Returns (3yr) | [ ] | | | |
| P&L Statements (3yr) | [ ] | | | |
| Rent Roll | [ ] | | | |
| Bank Statements (12mo) | [ ] | | | |
| Utility Bills (24mo) | [ ] | | | |
| Property Tax Bills | [ ] | | | |
| Insurance Policies | [ ] | | | |
| AR Aging | [ ] | | | |

### Physical DD
| Item | Status | Vendor | Cost | Due | Findings |
|------|--------|--------|------|-----|----------|
| Phase I ESA | [ ] | | $X,XXX | | |
| ALTA Survey | [ ] | | $X,XXX | | |
| CCTV Sewer Scope | [ ] | | $X,XXX | | |
| Physical Inspection | [ ] | | $X,XXX | | |
| Water Quality Test | [ ] | | $XXX | | |
| Electrical Inspection | [ ] | | $X,XXX | | |

### Legal DD
| Item | Status | Attorney | Due | Findings |
|------|--------|----------|-----|----------|
| Title Commitment | [ ] | | | |
| Lease Audit | [ ] | | | |
| Zoning Verification | [ ] | | | |
| Home Title Search | [ ] | | | |
| Litigation Search | [ ] | | | |
| Permit History | [ ] | | | |

### Market DD
| Item | Status | Due | Findings |
|------|--------|-----|----------|
| Comp Rent Survey | [ ] | | |
| Employment Analysis | [ ] | | |
| Population Trends | [ ] | | |
| Apartment Comps | [ ] | | |
| Supply Pipeline | [ ] | | |

### Budget
| Category | Estimated | Actual | Variance |
|----------|-----------|--------|----------|
| Phase I ESA | $X,XXX | | |
| Survey | $X,XXX | | |
| Sewer Camera | $X,XXX | | |
| Legal | $X,XXX | | |
| Appraisal | $X,XXX | | |
| Travel | $X,XXX | | |
| **Total DD Cost** | **$XX,XXX** | | |
```

---

## 12. References

### Industry Data Sources

- [SkyView Advisors Quarterly Reports](https://skyviewadvisors.com/) -- MHP transaction volume, cap rates, and market trends (Q1-Q3 2025 reports referenced)
- [NorthMarq Manufactured Housing Reports](https://www.northmarq.com/) -- Occupancy, rent trends, investment activity, cap rate data (H1 2025 referenced)
- [FHFA Manufactured House Price Index](https://www.fhfa.gov/news/news-release/fhfa-expands-housing-market-data-resources-with-new-manufactured-house-price-index) -- Quarterly price appreciation data for manufactured homes as real property
- [Mobile Home University](https://www.mobilehomeuniversity.com/) -- Lot rent benchmarks, DD manual, operator education
- [Keel Team Real Estate Investments](https://keelteam.com/) -- DD checklists, investment analysis methodology, utility risk guides
- [MHVillage](https://resources.mhvillage.com/) -- Home listings, title guidance, market data
- [Manufactured Housing Institute (MHI)](https://www.manufacturedhousing.org/) -- Industry statistics, zoning advocacy, regulatory tracking

### Agency Lending

- [Fannie Mae MHC Term Sheet](https://multifamily.fanniemae.com/financing-options/specialty-financing/manufactured-housing-communities-term-sheet) -- Current loan terms and requirements
- [Fannie Mae Multifamily Guide - MHC Chapter](https://mfguide.fanniemae.com/node/3656) -- Detailed underwriting and property requirements
- [Freddie Mac Optigo MHC Loans](https://www.multifamily.loans/freddie-mac-manufactured-housing-community-loans/) -- Loan terms, tenant protections, eligibility
- [Freddie Mac Optigo MHC Product Sheet (PDF)](https://mf.freddiemac.com/docs/product/manufactured_housing.pdf) -- Official product term sheet
- [HUD Section 207(m)](https://www.hud.gov/program_offices/housing/mfh/progdesc/homepark207) -- FHA insurance for MHP construction/rehabilitation
- [FHFA 2026 Multifamily Loan Purchase Caps](https://www.fhfa.gov/news/news-release/u.s.-federal-housing-announces-2026-multifamily-loan-purchase-caps-for-fannie-mae-and-freddie-mac) -- $88B Freddie Mac cap for 2026

### Environmental and Engineering

- [ASTM E1527-21](https://www.astm.org/e1527-21.html) -- Phase I ESA standard (current version)
- [FEMA Manufactured Homes & NFIP Coverage](https://agents.floodsmart.gov/) -- Flood insurance requirements for manufactured homes
- [FEMA P-85: Protecting Manufactured Homes from Floods](https://www.fema.gov/sites/default/files/2020-08/fema_p85.pdf) -- Elevation, anchoring, and flood mitigation guidance

### Legal and Regulatory

- [HUD Code Standards (42 USC 5401 et seq.)](https://www.hud.gov/program_offices/housing/mfh) -- Federal construction and safety standards for manufactured homes
- [Fannie Mae Manufactured Home Titling Guide](https://singlefamily.fanniemae.com/originating-underwriting/titling-manufactured-homes-real-property) -- Real property titling requirements by state
- State-specific regulatory guidance: See `mhp-regulatory` skill for 15-state rent/eviction/utility/deposit rules with statute citations

### Kevin Bupp / Sunrise Capital Investors

- [Kevin Bupp Podcast Archive](https://kevinbupp.com/podcast/) -- Mobile Home Park Investing Podcast and Real Estate Investing for Cash Flow
- [Kevin Bupp - Keel Team Interview (2024)](https://keelteam.com/post/kevin-bupp-16-years-of-mobile-home-park-investing-lessons-learned-whats-next/) -- 16 years of MHP investing lessons, Buy Box evolution
- Buy Box v3.0 criteria updated December 2024 based on podcast content and Sunrise Capital internal standards

### REIT Benchmarks

- Sun Communities Q3 2025 Earnings -- 10.1% same-property MH NOI growth
- UMH Properties Q3 2025 Earnings -- 12.1% same-property NOI growth, 39.7% expense ratio
- Equity LifeStyle Properties Q3 2025 Earnings -- 5.5% same-community rental income growth

### Utility Billing

- [Ikehu Utility Solutions](https://ikehusolutions.com/markets/mobilehomes/) -- MHP submetering and RUBS services
- [Yardi Utility Billing for Manufactured Housing (2025)](https://www.yardi.com/blog/utility-billing-manufactured-housing/) -- Technology solutions overview
- [American Submetering](https://www.americansubmetering.com/mobile-home-parks/) -- MHP-specific utility billing

### Financing

- [Select Commercial - MHP Loan Rates](https://selectcommercial.com/mobile-home-park-loan.php) -- Current rate tracking (5.58% as of Feb 2026)
- [Multifamily.loans - Fannie Mae MHC](https://www.multifamily.loans/fannie-mae-manufactured-housing-loans/) -- Loan comparison and requirements
- [Multifamily.loans - Freddie Mac MHC](https://www.multifamily.loans/freddie-mac-manufactured-housing-community-loans/) -- Loan comparison and requirements

---

**Skill maintenance schedule:** Review quarterly. Key triggers for update: new SkyView/NorthMarq quarterly report, agency lending term changes, FHFA cap adjustments, Sunrise investment criteria changes, new Kevin Bupp Buy Box updates, or regulatory changes affecting portfolio states.

**Cross-references:** `mhp-regulatory` skill (state-specific rent/eviction/utility rules), `mhp-operations-expert` skill (ongoing operations post-acquisition), `rm-accounting-expert` skill (GL codes and financial reporting post-close).

> **Workflow handoffs — Acquisition pipeline:** `mhp-acquisitions-expert` (deal analysis, DD, IC memo) → `entity-formation` (LLC setup, bank accounts, EIN) → `finance-operations-expert` (accounting setup, QBO entity) → `insurance-risk-expert` (coverage placement, COIs) → `mhp-operations-expert` (100-day operational integration)