$129K 7unit MHP - too good to be true?

6 Replies

This seems too good to be true, so it probably is.  But as I am new to this and my MHP experience is limited, I'd like your opinions and help in asking the right questions to uncover the real facts, dirty details.

 Here is what has been shared so far. 

10 units three of which are slabs without trailers on them and 7 of the slabs have trailers (park owned). Potential to add 4 more slabs.  Park potential of 14 units. 

Currently water and sewer included in rent, collecting $550 per month per rented trailer.

Thoughts?  Thank you in advance for sharing your experience!

Jason

Check the accuracy of their claims on all expenses. Are they on city sewer and water? How old is the infrastructure ?
I don't count park owned homes (POH) in my analysis, just the space rent as my goal would be to get POHs sold to tenants so they own the repairs. Check out the quality of the electrical and gas service points for each MH. If the space rent alone is $250 then I would say a quick and dirty valuation is 7 X $250 x 60 = $105,000 but you still need to peel back the onion. What terms are they offering?

HI Jason, Here's how I'd offer on your deal.  Ignore all empty spaces and acreage.  Only offer on paying pads.  Water/sewer included is bad.  Renters should pay not the park.  Parked owned homes are bad too.  Occupants should own the homes (and maintenance) and park just charge lot rent.

Find the prevailing lot rent for this area.  I'll assume $200 you substitute the real value.

7 paying lots x $200 lot rent x 12 months x 50% expense ratio since park pays utilities = $8400 NOI per year. At 10% cap rate, the offering price is: $84k

As is typical the park owner is way over valuing park owned home rent!!!!!   Park paying utilities is just nutz.  Poor management.

You didn't mention if septic for sewer or well for water.  VS city for both.  If well water drop the expense ratio below 50% maybe by alot.  

Wells have been taged by State enviromental depts to shut down or do crazy daily testing and alot more expense for chlorinators etc.  I wouldn't buy a park with a well certainly not for your first park.

Ah I see you're in FL.  Yes FL's Enviro Dept is cracking down on parks with wells big time.   If this park is on a well, he may be dumping his problem to a dumb buyer.    Call other parks.

Take a boot camp:  mobilehomeuniversity.com

Originally posted by @Curt Smith :

HI Jason, Here's how I'd offer on your deal.  Ignore all empty spaces and acreage.  Only offer on paying pads.  Water/sewer included is bad.  Renters should pay not the park.  Parked owned homes are bad too.  Occupants should own the homes (and maintenance) and park just charge lot rent.

Find the prevailing lot rent for this area.  I'll assume $200 you substitute the real value.

7 paying lots x $200 lot rent x 12 months x 50% expense ratio since park pays utilities = $8400 NOI per year. At 10% cap rate, the offering price is: $84k

As is typical the park owner is way over valuing park owned home rent!!!!!   Park paying utilities is just nutz.  Poor management.

You didn't mention if septic for sewer or well for water.  VS city for both.  If well water drop the expense ratio below 50% maybe by alot.  

Wells have been taged by State enviromental depts to shut down or do crazy daily testing and alot more expense for chlorinators etc.  I wouldn't buy a park with a well certainly not for your first park.

Ah I see you're in FL.  Yes FL's Enviro Dept is cracking down on parks with wells big time.   If this park is on a well, he may be dumping his problem to a dumb buyer.    Call other parks.

Take a boot camp:  mobilehomeuniversity.com

well said! but dont forget the value of the 7 mobile homes. only pay 75% of what they would fetch immediately. So that could be another 30-50k total. If it is not all city, I would probably walk, as there really arent enough units to shoulder the ongoing maintenance costs. The prices in FL are nucking futs, how are they in GA?

Sebastian

Originally posted by @Jason Abbott :

This seems too good to be true, so it probably is.  But as I am new to this and my MHP experience is limited, I'd like your opinions and help in asking the right questions to uncover the real facts, dirty details.

 Here is what has been shared so far. 

10 units three of which are slabs without trailers on them and 7 of the slabs have trailers (park owned). Potential to add 4 more slabs.  Park potential of 14 units. 

Currently water and sewer included in rent, collecting $550 per month per rented trailer.

Thoughts?  Thank you in advance for sharing your experience!

Jason

 dont forget that it will cost you 25-30k per home to fill each pad. I would check some of the surrounding areas( plant city, lakeland ) for parks and cold call/ mail contract to each park. get it under contract, due diligence, and make sure to have an easy out so that you will not lose your deposit.

Sebastian

@Curt Smith
Thanks for those details. I never seem to find a fair deal on a MHP. It seems, like you mentioned, someone is trying to pass on a problem onto me and at a high price. But, eventually someone buys them.

Account Closedto a well (or any problem).  Your purchase contract sets up an escrow account to set aside for any well problems for 12 months.   

Once you believe there are no problems without solutions you'll be offering on more deals.

For example, why not offer a price that makes sense to you on this park.   I ignored the asking price and calculated my own offer.  Which Sabastian is right.  I should have added in the craigslist value of the home which in GA is around $3k each. So my calculated offer should be $84k + 7 x $3k = $105k (assuming city water / sewer).

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