How to Set Up a Holding Company for Your Mobile Home Park Portfolio

By Harry Shurek, EA | The MHP Accountant®

You bought your first park. Then your second. Now you have three parks and they are all in the same LLC — because that is how you set it up when you bought the first one and you never restructured.

One lawsuit from the first park can now reach the assets of the second and third. One lender reviewing the second park sees revenues and expenses tangled up with the first and third. One exit from the third park drags along the tax history of all three.

This is the problem a proper holding company structure solves. Here is exactly how to build it.

Why Multi-Park Operators Need a Holding Company Structure

The single-LLC approach is common among operators who grew faster than their legal and tax infrastructure. It works fine for one park. It becomes a liability — literally — at two or more parks.

The three core reasons to restructure into a holding company:

1. Liability Isolation

Each park is its own operating environment with its own liability exposure. A slip-and-fall, an environmental issue, a tenant lawsuit — these are park-specific events. If each park is a separate LLC, the judgment creditor’s reach is limited to the assets of that LLC. The other parks are protected behind their own entity walls.

Putting multiple parks in one LLC means every park’s assets are potentially reachable in a claim against any park.

2. Financing Flexibility

Lenders underwriting a loan on Park B want to see Park B’s numbers — clean, standalone NOI, its own rent roll, its own expense history. If Park B shares an entity with Park A and Park C, the financials are entangled. You will spend time disaggregating income and expenses for every loan application, and some lenders will require a restructuring before they will proceed.

Separate entities mean separate, clean financials for each park from day one.

3. Exit Efficiency

When you sell a park, a clean single-entity structure for that park simplifies the transaction. The buyer acquires the membership interest in the park LLC (or buys the assets out of it). The sale is isolated. The other parks are untouched.

Selling one park out of a portfolio LLC requires an allocation of assets and liabilities, complicates the basis calculation, and creates due diligence headaches for the buyer.

The Standard Architecture: HoldCo / OpCo / Park LLC

The structure that sophisticated MHP operators use has three tiers. Here is how each tier works and why it exists.

Tier 1: The Holding Company (HoldCo)

The holding company is typically a single-member LLC or a multi-member LLC if there are partners. It does not operate anything directly. It owns membership interests in the park LLCs and, optionally, in the management company. All distributions from the operating entities flow up through HoldCo to the individual owners.

HoldCo has no employees, no payroll, and minimal expenses. Its purpose is ownership aggregation, liability protection at the top level, and estate planning flexibility. Transfers of ownership interest in the portfolio happen at the HoldCo level — you do not touch the individual park entities.

Tier 2: The Management Company (OpCo)

The management company is typically an S-Corporation. It employs you (or your staff), charges management fees to each park LLC, and receives those fees as income. Because the management company is an S-Corp, you take a reasonable W-2 salary from it, and excess profits flow out as distributions that are not subject to self-employment tax.

This structure separates active management income (subject to SE tax rules) from passive lot-rent income (not subject to SE tax). See our post on MHP owner salary vs. distributions for the full analysis of this distinction.

Tier 3: The Park LLCs

Each park is owned by a separate LLC. The LLC is owned by HoldCo (or directly by the owners if HoldCo is not yet in place). The park LLC holds the real property, the park-owned homes, the infrastructure, and all park-specific assets. It generates lot rent, POH rent, and other income. It pays management fees to OpCo.

For federal tax purposes, a single-member LLC (owned by HoldCo) is a disregarded entity — its income flows directly to HoldCo’s return. A multi-member LLC files a Form 1065 partnership return. The choice depends on the ownership structure at the park level.

How Management Fees Flow

The management fee is the mechanism that moves active income out of the passive rental entities and into the management company. The fee must be:

• Documented — a signed management agreement between each park LLC and the management company, setting the fee as a percentage of gross revenues or a flat monthly amount
• Reasonable — consistent with what you would pay an arms-length third-party manager for the same services (typically 4-10% of gross revenues depending on the market)
• Actually paid — money must actually move from the park LLC bank account to the management company bank account; book entries alone are not sufficient

From the park LLC’s perspective, the management fee is a deductible operating expense that reduces taxable income. From the management company’s perspective, the fee is ordinary income — against which the company’s own expenses (payroll, office, etc.) are offset.

What This Structure Does for Lender Underwriting

Commercial lenders evaluating an MHP loan want to see the park’s standalone NOI. They will normalize the P&L — stripping out unusual items and making sure expenses are complete and normalized.

When each park is a separate entity with its own financials, the lender’s job is straightforward. The rent roll, the income statement, and the balance sheet are all park-specific. The management fee shows up as an operating expense (which lenders include in NOI calculations — management is a real cost of the business).

When multiple parks share an entity, the lender has to manually disaggregate. This adds time, adds scrutiny, and occasionally adds conditions to the loan commitment.

1031 Exchange Flexibility With This Structure

When you sell a park in a standalone park LLC, the 1031 exchange is clean. The relinquished property is clearly identified. The gain is isolated to that entity. The replacement property goes into a new park LLC (or the existing one, renamed).

Exchanging a park out of a portfolio LLC creates complexity. The exchange is at the entity level, which means the entire LLC is the taxpayer for purposes of the exchange — not just the sold park. This creates basis and identification complications that a standalone structure avoids entirely.

See our post on 1031 exchange vs. installment sale for MHP sellers for more on exit structure planning.

Common Mistakes to Avoid

When to Set This Up

The ideal time to build this structure is before you acquire your second park. The second-best time is now.

Restructuring an existing portfolio requires careful planning. Transferring real property between entities can trigger due-on-sale clauses in existing loan documents. Lender consent or title company involvement may be required. The restructuring itself should be done with an attorney and a tax advisor working together — the legal and tax implications are intertwined.

The cost of restructuring is real but finite. The cost of operating without the structure — a judgment that reaches across your portfolio, a lender who requires a restructuring as a loan condition, a 1031 exchange that fails because the structure can’t support it — is potentially much larger.

Frequently Asked Questions

Disclaimer: This article is for general informational purposes only and does not constitute tax, legal, or financial advice. Tax laws change frequently and individual circumstances vary. Consult a qualified tax professional before making any decisions based on the information contained herein. The MHP Accountant® is a tax preparation and advisory firm; nothing in this article creates a client relationship.