Georgia Mobile Home Park Deal
Can you help with general feedback and guidance on considering this opportunity not yet under contract? I have a lead on a 36 lot mobile home park on 16 lots and each lot is accessible to the county roads and has its own driveway. Park infrastructure is 50 years old. Only 5 of the 36 are occupied. There are 24 trailers than need to be removed and 7 vacant lots. 24 need to be removed to make way for infill. Each lot is on septic and shared well. There is one active well serving the current residents and 2 others that are inactive that I imagine will need to be brought up to serve the remaining lots and/or provide redundancy/backup. Septic condition is unknown but trying to get more info from local servicers. The nearby City sewer does not go out this far so I wouldnt be able to hookup to municipal water/sewer.
Town is population 4000 and closest major city is Macon, GA. Population has seen a decrease of 13% in last decade.
Seller (flipper) states NOI of 8832/year (based on 5 units at lot rent of 200-250). Using 6% cap rate and 8832 NOI, I get 147k valuation. Seller wanted 210, but willing to accept 152k so far, but I have yet to break the 147k valuation based on current occupancy.
Work needed:
remove 24 old trailers
landscaping on vacant lots
upgrade infrastructure to connect lots to wells if leaks present (vacant lots make big unknowns)
infill with used single wides (figure 10 per year for 3 years to fill all 31 unoccupied lots)
pump or repair septic where needed (DD TBD)
bring online 2 additional wells for redundancy and connect to existing lots
Post infill NOI after 3 years is about $47,500 based on lot revenue of 81,000 (75% occupancy). If I go through with the deal, I'll use my own capital and offer 50k down, with 100k on 5 year note @ 6%. ($1933/mo). cashflow is $24300/year.
This doesnt include the capital to remove, buy, place, restore used single wides, and up front capital to address other deferred maintenance.
Does this plan have too many risks? Is the private well/water too risky given age of the property? Does it seem like alot of value-add work for a mediocre cashflow once stablized at year 3?
Thanks in advance!
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#1 Mobile Home Park Investing Contributor
- Real Estate Investor
- Ste. Genevieve, MO
When you put the zip code in Bestplaces.net what is the metro or county population, what is the SF home price, what is the 2 bedroom apartment rent and what is the housing vacancy rate?
Population decline is a key consideration when it comes to any multifamily investment. I would look closely at this. IMO, with SFRs you can likely fill it despite any of the macroeconomics of the area. But with MF, it may be challenging to get that 100% occupancy.
Additionally, this one looks like it needs alot of work. I think as you mentioned, alot of risk and unknown costs here on this one.
Quote from @Frank Rolfe:
When you put the zip code in Bestplaces.net what is the metro or county population, what is the SF home price, what is the 2 bedroom apartment rent and what is the housing vacancy rate?
total population of the town is 12k. I get about $928/mo for a 2 bed. I see about 10% total housing vacancy rate in the town. about 56% renter vs. 44 owner occupied community.
Quote from @Dave Rav:
Population decline is a key consideration when it comes to any multifamily investment. I would look closely at this. IMO, with SFRs you can likely fill it despite any of the macroeconomics of the area. But with MF, it may be challenging to get that 100% occupancy.
Additionally, this one looks like it needs alot of work. I think as you mentioned, alot of risk and unknown costs here on this one.
Thanks for the feedback. Agreed that population decline is of concern and not what successful investors look for as criteria. The population at 12k (just confirmed) is down from 13k in 2010, but up from 2000 at 10k. So its not been a long-term decline.
I just checked and there is a 10% total vacancy for the town, so that seems to suggest there is a housing shortage. but agreed, I underwrote my NOI proforma for 25% vacancy expecting not to fill the entire park.
I would recommend you do not move forward with this with the intent to infill. The scope of the work you mentioned is absurdly expensive these days and used mobile homes are scarce. The moving and setting back up is also expense. Additionally with the shaky population stats you mentioned, it's also a huge risk for a low upside. I feel like you can find something better. On the flip side, maybe it's a decent investment at such a low price with good seller carry terms just leaving it as is. I'm a mobile home park owner in WY and I did a small amount of infill. It takes ALOT of capital.
I say go for it! There is plenty of upside potential. I mean how many opportunities do you get for this cheap? You are talking about Georgia. There is plenty of places to find used homes you just have the take your time and look. Those vacant lots are an opportunity to add huge value one you infill each one. Do not try to remove all abandon house at once since that will drain your pocketbook. Instead find 2-3 of them and repair. This rent will go to your bottom line and add cash flow. The only way I would say this is a no go is if it was in a rough crime area.