MHP Due Diligence: The Financial Checklist Before You Close

You have a mobile home park under contract and 30 days to complete your due diligence. Every day that passes without a complete document package from the seller is a day of analysis time you will not get back. And every item on this list that you skip is a risk you are accepting without knowing it.

The financial due diligence process for an MHP acquisition is not a formality. It is the systematic verification that what you are buying actually earns what the seller claims — and that there are no financial, tax, or structural issues that should change your price, your terms, or your decision to proceed at all.

This checklist is structured as an action document: what to request, what to look for in each document category, and what red flags indicate a deeper problem. Work through it with your MHP-specialized CPA during the inspection period.

How to Use This Checklist

This checklist is organized into eight document categories. For each category, you should request the documents, review them against each other (cross-referencing is where the real analysis happens), and flag anything that does not reconcile cleanly for follow-up with the seller.

The checklist is not exhaustive — every park has unique characteristics that may require additional review. But these categories cover the financial issues that appear most consistently in MHP acquisitions and represent the minimum standard for pre-close financial review.

Category 1: Federal Tax Returns — 3 Years

What to request: Complete federal income tax returns for the selling entity and/or the individual seller (if the park is held individually) for the prior three tax years. If the park is owned by a pass-through entity (LLC, partnership), request both the entity return and the personal returns of the principal owners.

What to look for: Compare the gross rental income, total expenses, and net income on the tax returns against the seller’s operating statements and the offering memorandum. Significant discrepancies in either direction require explanation. Look at Schedule E or Form 8825 for the actual income and expense breakdown. Review the depreciation deduction on Schedule E for clues about how the seller has classified assets.

Red flags: A seller who refuses to provide tax returns. Gross income on the tax return that is materially lower than the seller-represented income. Large depreciation deductions that are inconsistent with the asset base (suggesting aggressive deductions that may not have been correctly supported). Non-recurring items — insurance proceeds, legal settlements, one-time fee income — that inflate a single year’s NOI.

Category 2: Rent Roll — Current and 24-Month History

What to request: A current rent roll listing every lot and every POH by unit number, resident name, lease start date, lease type (month-to-month vs. term lease), monthly lot rent, monthly POH rent (if applicable), current balance (rent due vs. paid), and any active payment plan arrangements. Also request 24 months of historical rent rolls if available, or at minimum 12 months of month-by-month occupancy reports.

What to look for: Reconcile the current rent roll’s total income against the operating statement’s reported rental income for the current month. Verify that the occupancy percentage claimed by the seller matches the rent roll data. Identify lots showing zero current income and determine whether they are vacant, occupied by non-paying residents, or flagged as “ready to rent” despite having no actual prospect.

Red flags: High current occupancy that is inconsistent with the 24-month occupancy trend. Multiple lots on payment plans for back rent. Lot rent rates that are above current market (suggesting upcoming resident turnover if rates are adjusted). A rent roll that does not reconcile with bank deposits. POH rental rates that are below lot rent — which may indicate the seller is subsidizing rent for problem residents ahead of a sale.

Category 3: Operating Statements — 2-3 Years Monthly

What to request: Profit and loss statements for the prior 24-36 months, presented monthly rather than as annual summaries. Monthly statements reveal seasonality, one-time items, and expense patterns that annual statements obscure.

What to look for: Review total revenue by category — lot rent, POH rent, utility income, late fees, other fees. Review expenses by category — utilities, maintenance, management, insurance, property taxes, professional fees. Cross-reference each expense line against the rent roll and any available bank statements. Calculate the trailing 12-month NOI and compare it to the seller’s representation.

Red flags: Utility expense that is significantly lower than what you would expect given the park’s size and utility infrastructure — suggesting deferred utility maintenance or incorrect expense classification. Management fees that are missing or artificially low (sellers of owner-managed parks sometimes omit a market-rate management fee from their stated expenses, which inflates the marketed NOI). Capital improvement costs classified as operating expenses to inflate year-on-year expense trends.

Category 4: Bank Statements — 12 Months

What to request: Monthly bank statements for all accounts used to operate the park for the prior 12 months. This includes operating accounts, security deposit accounts, and any other accounts through which park income and expenses flowed.

What to look for: Reconcile bank deposits against the rent roll — total deposits in each month should be reasonably consistent with what the rent roll indicates was collected. Large deposits that do not correspond to rent collections require explanation. Expenses paid from the operating account that do not appear on the P&L indicate off-book expenses. Owner distributions should be identifiable and excluded from the NOI analysis.

Red flags: Deposits that are materially lower than the rent roll would imply. Large transfers to or from related entities without clear documentation. Irregular payment patterns that suggest the park is cash-flow stressed despite a healthy paper NOI.

Category 5: Depreciation Schedules and Asset Records

What to request: The seller’s depreciation schedule from the most recent tax return — the complete asset-level detail, not just the summary depreciation deduction. Also request any purchase records or HUD Data Plates for individual POHs if available, and any cost segregation study documentation if one was previously performed.

What to look for: How are POHs classified on the depreciation schedule — as 5-year personal property or as 27.5-year residential real property? How are land improvements classified? The answers tell your CPA what the seller’s asset allocation was and whether there is a Form 3115 lookback opportunity for the buyer at the time of acquisition.

Red flags: All park assets on a single 27.5-year line (indicating no cost segregation was done and no asset separation was performed — which is the most common situation and not a deal-killer, but a significant planning input for the buyer). Depreciation deductions that are inconsistent with the represented asset base.

Category 6: POH Title Documentation

What to request: For every park-owned home, request the certificate of title or equivalent title documentation. Confirm whether each home is titled as personal property or has been converted to real property. Also request a list of any homes with outstanding liens — finance company liens on the home title are a common issue in MHP transactions.

What to look for: Whether each POH has a clean, transferable title. Whether any homes have been de-titled and converted to real property (which affects the buyer’s depreciation classification going forward). Whether any homes have outstanding finance liens that must be satisfied at or before closing.

Red flags: Homes with no traceable title. Homes with outstanding liens that the seller did not disclose in the purchase and sale agreement. Homes that the seller represents as owned by the park but whose title shows a different owner. Any homes subject to existing installment sale contracts or rent-to-own arrangements that may encumber the home at sale.

Category 7: Utility Billing Records and RUBS Documentation

What to request: Copies of actual utility invoices (water, sewer, electric, gas) for the prior 12-24 months. If the park uses RUBS billing to pass utilities back to residents, request the RUBS calculation methodology, a sample billing, and the resident lease provisions that authorize the billing. If the park has utility submeter infrastructure, request the metering records and billing history.

What to look for: Verify that the utility costs on the P&L match the actual utility invoices. Verify that RUBS or submetering income in the revenue section reconciles with the utility expense in the expense section. Confirm that the RUBS methodology is contractually supported by the resident leases — unauthorized utility pass-throughs create legal risk for the buyer.

Red flags: Utility income shown in revenue that significantly exceeds the utility expense — a park cannot bilk more from residents than it pays the utility company without legal exposure. RUBS billing that lacks documentation in the resident leases. Utility accounts in arrears or subject to pending rate changes that would materially affect the park’s expense structure post-closing.

Category 8: Entity Documents, Debt, and Liens

What to request: Current operating agreement or organizational documents for the selling entity. Existing loan documents for any mortgage or note secured by the park. Lien search results for the real property and for each POH by serial number. Any existing ground leases, easements, or other encumbrances not reflected in the title report.

What to look for: Confirm the seller has authority to sell and that the ownership structure matches what is represented in the purchase agreement. Review loan documents for any due-on-sale clause, prepayment penalties, or assumption requirements that affect the deal economics. Confirm that POH title liens identified in Category 6 are being addressed in the closing mechanics.

Red flags: Ownership structure that does not match the representations in the purchase agreement. Loan terms that create unexpected closing costs through prepayment penalties. Liens or encumbrances that were not disclosed in the initial marketing or LOI stage.

How This Checklist Connects to Your Tax Strategy

The financial due diligence checklist is also your tax planning intake document. The information gathered here — POH title status, seller’s depreciation schedule, asset composition, utility billing structure — feeds directly into the key tax decisions you and your CPA will make before closing:

Purchase price allocation for tax purposes. Entity structure for the acquisition. Cost segregation study scope and timing. Bonus depreciation planning. 1031 exchange coordination if you are reinvesting proceeds from a prior sale.

An MHP-specialized CPA uses the due diligence findings to build the acquisition tax plan simultaneously with the financial verification review. The two processes are not sequential — they happen in parallel during the inspection period. See our detailed overview of what financial due diligence on an MHP acquisition involves and how MHP strategic tax planning connects to the acquisition structure.

Frequently Asked Questions

For IRS guidance on business purchases and asset allocation, see IRS guidance on buying or selling a business.

This content is for educational purposes only and does not constitute tax or legal advice. The MHP Accountant recommends consulting a qualified CPA for advice specific to your situation.