Mobile Home Park Purchase for $69,900
I have recently been asked if I'd be interested in purchasing a mobile home park for $69,900 that produces $1,900 monthly income with 5 more spots available.
I have no clue where to get started and what questions to ask.
Please help me in where I should get started regarding mobile home park investing.
Thanks!
That sounds like a fair valuation. Small parks are relatively illiquid and do not appeal to larger buyers, so they trade at high cap rates (15%+).
But you have a hundred+ hours of learning to do. I like the course materials offered at MobileHomeUniversity.com - especially their 3-day long weekend bootcamp.
The key things you are going to need to focus on are:
1. Is this park on city water and city sewer? If it has well or septic, I'd drop it - there is simply too much 'big expense' risk, unless you are fairly flush with cash.
2. Is it in a major metro (50,000+)
3. How many of those mobile homes will you own? They are a pain and a real expense to manage.
4. Does the P&L show at least a 30% expense load on the lot rents alone? (The P&L for the mobile homes may well operate at/below break-even - a good reason to get out of the mobile home business and focus on the land). Many sellers under-report expenses - especially their time spent managing (at least 5% of revenues) and repairing (at least another 5% - 10% of revenues), and doing accounting (figure $1/lot/month). Also, your property taxes will likely rise, unless you are purchasing the property for less than it's current assessed value (I've only managed to do this once). So make sure you are not using a tax figure based on the current value of the park, which is likely based on the seller's acquisition price from a decade ago or more.
5. How are you going to finance this? This deal is too small/unusual even for most local banks (still, call them). If the seller is offering reasonable seller financing (say, 75% LTV, 5% fixed for 5+ years on a 20 yr. am.), then your financing problems are solved.
Thanks.
