Looking for comments/suggestions on a Mobile Home Park deal

I have found a deal here in Central Arkansas on a mobile home park that I would love to get comments and/or suggestions on. I have a private money lender who is interested in the deal with me but I've never bought a MH park before. Here are some details:

* Inside city limits (you can't create any more parks in city limits by law)
* 29 pads (no park-owned homes)
* Pads rent for $150/month or $190/month (depending on whether the homeowner has dog(s)
* Currently 11 pads are rented (8 w/o dogs, 3 with)
* Selling for $150k
* Owner owes $100k and is willing to finance $100k with down payment of $50k. I don't know any other terms than that at the moment.

What questions should I be asking the seller? What should I be looking for? Is this a deal that seems good? It certainly looks fantastic to me by numbers, but again, I'm new to MH investing.

Any comments or suggestions would be much appreciated.
Thanks!
-geoffrey

Just Don

485 posts
4 awards
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Dec 17 '10, 02:18 AM

since it is inside city limits it better have existing city water and sewer. Who pays that?Hopefully individually metered to tenants. How about other expenses, street, street lights, etc. There are probably many more expenses than meet the eye.

It is going to be expensive to fill this park since the easiest and best way is to buy homes(hopefully at a huge discount) that need moved elsewhere and move them to your park and resell them to good tenants.

'here' they started a new rule if the mobile owner doesnt pay the personal property tax as due,,the court owner has to before it is moved or torn down. HUGE expense and liabilty exposure as several years taxes can easy be thousands or tens of thousands of dollars. This comes to play when house gets worn out or tenant disappears in the night. Which happens more often than you think.

Check on other licensing requirements also by city or state or both. Around here they LOVE to close whole parks for any little excuse. One was closed because something electrical was located too close to natural gas equipment.

Never heard of charging 40 bucks for having a dog,,,thats a new one on me,,,but sounds like a good idea,,,does that include inside dogs??

Due diligence and keep your eyes wide open,,,good luck

Steve Streetman

Real Estate Investor · Annapolis, Maryland

3 posts
50 influence

Dec 27 '10, 11:42 PM

The park appears to have some upside if you can fill the vacancies. That may be difficult (as Just Don has pointed out) and apparently has been difficult for the current owner.

If you buy based on actuals, it appears you have gross income of ~1770/mo. or 21,240/yr. If you take expenses to be about 40%, your NOI is 12,744. A park like this might only go for a 10 CAP or $127,000. So it doesn't appear to me that the purchase price of $150k is that much of a deal unless you can get another 4 or 5 units rented before closing.

There are, of course, many things to look at including the actual expenses, the rental market, the local economy and your own approach to managing and filling the park. These all affect what your ultimate return will be.

Good luck with the project.

Leslie A.

Real Estate Investor · Houston, Texas

92 posts
2 awards
50 influence

Dec 28 '10, 12:47 AM

I would ask the seller why the park is so empty.
I think Steve's analysis of the numbers is right on. The extra empty pads are a great plus, but like he said, filling them might be difficult.

Chris C.

Real Estate Investor · Easley, South Carolina

58 posts
2 awards
50 influence

Dec 28 '10, 01:44 AM

All cities and towns close to me have banned mobile homes from being moved into the city limits. Existing homes are exempted. Make sure there isn't anyone on the local council pushing for this type of law or that it hasn't already happened and the owner is trying to dump the park before the word gets out.

Also don't make the mistake I did with right of ways. I bought a small 2 acre park with 4 lots. One was empty. Found out that it was empty after I purchased the park because while it was vacant a new power line was ran above the lot. Now a home can not be placed under the power line. Made a good deal just ok.

Dale Osborn

Mobile Home Investor · Spanaway, Washington

1,307 posts
16 awards
61 influence

Jan 18 '11, 01:14 PM

Will the property support itself? You need to get all of the income and expense info an verify that you can make it work with the existing rentals.