How to analyze this MHP?

168 spaces
10% occupied
Park is bank owned
Bank is asking $650k --they have an appraisal for this amount
Park is on 20 acres
The only ammenities are a tennis court and a basketball court
Lot rent is $150/month
There is no onsite mgr, but an onsite handyman
Park has 2 wells, and lot rent covers water and garbage
The bank is willing to finance, and from what I hear they turned down an offer at $410k, but my guess is they'd take something close to it.
Bank is willing to offer extremely flexible terms
The park has been "cleaned up" there are no non-paying residents or vacant mobiles that need to be removed or repair work that needs to be done
The park currently has no website and no marketing efforts behind it
The park has a bad reputation in town--but that could be changed with some improvements as well as a name change (IMO)

How would you look at this opportunity? ...Is it a diamond in the rough or just a lump of coal?

Where would you start with the DD on something like this?

Any feedback is much appreciated.

Thanks! :)

Edited: 06/26/2010 at 10:30AM

Amy W.

Real Estate Investor

5 posts
35 Influence

Icon_minipost Nov 14 '09, 10:33 AM

This seems like a good price for 168 spaces, however, unless you are planning on putting your own homes in, you could continue to have a problem with high vacancies. It is difficult for people to get loans on homes to put in parks. The new game is buying your own homes and setting them up as rentals, at least in Missouri. Also, I saw that you said it had two wells. Does it have a septic system or is it on public sewer? This can run into some money and if you don't have experience running septics, you'd have to hire someone to run it. However, the price per pad is fairly reasonable for the pad rent ($150) if the pads are ready to go, i.e. piers or slab, electric, water, sewer.

Edited: 06/26/2010 at 10:31AM

Terry Drake

Real Estate Investor

260 posts
2600 Influence
5 Awards

Icon_minipost Nov 16 '09, 07:18 AM

Have you gotten any more information from the bank about it such as NOI?

Edited: 06/26/2010 at 10:32AM

Dwight Droze

Real Estate Investor · citrus heights, California

138 posts
673 Influence
2 Awards

Icon_minipost Nov 17 '09, 12:49 PM

a basic way is lot rent (x) lots rented (x) 60. Its like the 1% rule in renting homes. and if they pay their own utilities its the same except you use 70 instead of 60.

The banks from what i hear only goes by the amounts that each pad brings in too. Not what the mobile homes on them are worth even if the park owns them. Thats how they appraise them from what i understand. I think the bank realizes they are screwed and want to finance it hoping someone will get it going but hinestly it sounds to much to me.

Alot of spaces though (you said 10% occupied so im assuming there is 16 people there. and a bunch of empty lots) to have to fill with homes. homes are like a couple grand to move to begin with. One way is to post an add for free move in and hook up..

The way i calculate its worth 1.465,000 buck fully occupied lot rents only. BUT they arent filled. Make all the tenants pay their own utilities and raise the rent $25 and now its easily 2 million value. Just created 500k by raising the rent a tiny bit and making them pay their own crap, except water cause u have a well. This is an idea of how to create money doing it :). So i dont know about that deal honestly. i just know some basics so someone correct me if im wrong?

Edited: 06/26/2010 at 10:33AM

Jim Johnson

Real Estate Investor · Denver, Colorado

147 posts
2247 Influence
4 Awards

Icon_minipost Nov 17 '09, 01:14 PM

Infill parks are costly in both time and money. To pull in a home for 10k you need to buy it for under 7, and it needs to be ready to go without issues once it is blocked, leveled, plumbed, electrified, skirted and sold... Now you need to look at the benifit of filling the pads...
Lot rent is $150 per month... so some quick math...
150 (per month) x 12 (months) = your gross income- $1,800
1,800 (gross) x .7 (rough multiplier to figure net) = NOI / PAD @ $150 / month - $1,260
1,260 (NOI) / (divided by) .11 (CAP RATE) = $11,454 Which is the value of each pad if priced at a 11 CAP-

please do not try to tell me your in a 7 or 8 CAP market... I am being generous at a 11 CAP, it should probably be a 12 ($10,500).

So your spending $10,000 to increase the value of your park by $11,454...

Really this is then a Lonnie Deal Lot, and the value is the income you get off the notes...

If and only if: Pad rents were like $300 plus, in a strong 10 CAP market, and inventory was selling at a smokin rate, and IF you had (or could raise) 1-1.5 million in cash to fund homes... IF lot set up were reasonable, demand was strong, the infrastructure was secure... Then maybe this dog would hunt... but as it sits...

This dog dont hunt

My advise... find a deal that is full, or mostly full, add value by raising pad rents, restructure expenses and keep it simple...

** and on a personal note- stalking is showing up at lunch and just sitting down, going to lunch is networking...**

Edited: 06/26/2010 at 10:33AM

Dwight Droze

Real Estate Investor · citrus heights, California

138 posts
673 Influence
2 Awards

Icon_minipost Nov 18 '09, 01:38 AM

sounds like the dog has 2 legs so hes gonna have a problem. Then again, on the news i saw a dog running with 2 rear legs.......creepy.

What i want to do and what you should do, is find owner finance properties that are full or close. Also once you get how it works and have something to show for, or if you've invested before in other real estate i would start raising capital from angel investors or local cash investors who want a good return. Just follow the SEC laws when raising money unless you want to go to jail. A good page to learn is privatemoneyblueprint.com

Edited: 06/26/2010 at 10:34AM