Looking for advice on this property!
There is a 14 unit mobile home park with 2 single family homes for sale a short distance from my house. Less than one mile to be exact. It has been for sale for some time and I just recently called and got the figures on it and would like opinions on it!
14 mobile home...$435-$500
2 Houses....$750/each
8 acres highway frontage only 1 mile from a major interstate exit and 2 miles from major town.
Asking price is $400,000.
All homes have individual septic tanks except for one house and two trailers, they are on one larger septic tank.
This is something very new to me and would love to hear from anyone with experience in this sort of investment.
1. Is the property 100% occupied?
2. Is the seller willing to carry back financing?
3. You need to find out occupancy? how long have/will the tenants stay there
4. are they ontime with rent
5. What deferred maintenence does the property have if any?
6. average vacancy rate?
7. This is a commercial deal so it is a different animal than residential
8. If seller is willing to carry, how much? for you the least amount you can put down the better.
9. If you secure your own financing do you have down payment? closing costs.
10. what are your operating expenses? lawn, utilities, cleanup etc....
I like the numbers if it's fully occupied.
Here is a Post Joshua Dorkin did back in 2008. Its a property analyzer worksheet so that you can plug in the numbers and ask questions to the seller.
Good Luck to you! Gerald
Thank you for the fast response. I will check out that article. Here is a few more details.
1. Property is fully occupied except for one mobile home.
2. Seller will not carry anything.
3. All tenants have been there 3 plus years and all just signed a one year lease.
4. All are on time, one or two is a few days late but never past due.
5. All maintenance is up. One house will need a roof in two years or so.
6. Property is almost never vacant. The one that is vacant now was the first in 2 years.
7. Will have to put cash down to get the deal done. But have an on site maintenance man that takes care of everything for half of his rent covered.
Jack -
You need to spend 30 - 50 hours getting educated about the quirky niche of mobile home parks. The materials and 3-day long Bootcamp at mobilehomeuniversity.com will be your fastest and best-quality path to getting educated.
But briefly, a small park like this will trade for 60 - 70 times the monthly lot rent at best. I do not see anything in your description that discusses the lot rent. It sounds like the mobile homes are all owned by the park and rent for $435 - $500. Look at competing parks, and determine what is a reasonable lot rent. Multiply by 60 if the park pays water + sewer, and by 70 if not. The reason for the lower 60x multiplier is that the cash flows are worth less if you are paying the utilities. If not, then each pad is worth 70x the monthly lot rent. (And who pays water? Is this property on a well, or is it on city water?)
Then value the mobile homes for what they can be sold for on a note in the park with $1,000 down. Run some test ads on Craigslist to gauge market interest. You want to get out of the business of owning (and, hence, maintaining) the mobile homes. Given the low rental amounts quoted above, I suspect the mobile homes date mostly from the 1980s, in which case they might be worth $5,000 - $7,500 each, tops.
Then add the value of the single family houses (ask a broker for comps; find out if they can be parceled-off and sold after you acquire the property).
Adding up the value of the
1) real estate,
2) wheel estate, and
3) SFHs
... will give you the total fair market value for this property. Small properties like this trade at a discount. There will not be many buyers for such a sub-scale business. You, by virtue of being so close, are the ideal buyer, and there will not be many 'yous' out there for this property.
FYI, I tend to stay away from septic entirely. You could go bankrupt in a month if the system fails and you do not have deep pockets (or a willing bank) to help you upgrade. This is yet another reason a small property like this will trade at a discount to a larger property on city water + sewer.
If everything checks out well during your due diligence (e.g. this MHP *is* on city water, and the septic checks out 100% by an expert septic inspection company [don't use just a regular plumber]), then my gut tells me this property is worth closer to $275,000 than $400,000. Make an offer that works for you, not for the seller. It's already been on the market a while. Write up an offer (with contingencies for you to get out if the due diligence or bank financing does not come through) and deliver it to the seller. Lock up the property while you conduct your diligence and really see what this is all about.
My 2 cents worth,
-Jefferson-
Hi Jack,
Congratulations on actually calling a seller and stepping outside your comfort-zone for this one.
Great advice and 2 cents Jefferson.
Jefferson gave some good advice with regards to many of the concerns I would have as well. The septic could be an issue however with proper inspection and upkeep this is workable.
Personally I am a fan of owning the land of a mobile home park and not owning any of the homes. With this park you will have to maintain and rent the homes forever to continue receiving this income monthly, as I doubt lot rents are $430-$500 per month.
In addition $400,000 is not a motivated seller, sounds like over retail price to me. It also sounds like there is little upside for you to develop more lots or improve the park for a higher resale value or to increase the income. However I may be wrong about this as I am do not know much about the park except for what you mentioned.
In my mind this is a pass. However I am just one person and if this type of investment and cash flow and maintenance-involving park is right for you then do your due diligence and find out more.
I hope this helps. If you have any follow up questions or are still confused don't hesitate to reach out. Keep up the good effort.
Talk soon,
John Fedro
Thanks everyone for the comments. Very new to this and any information from anyone willing to help Is great. I'm sure I'll have more questions as I go through this so bear with me and thanks again!