Why MHP and not SFR?
I caught the mobile home bug while talking with a family friend who lives in a rural part of town and owns around 100 mobile homes and lots. I like the idea of all the rentals in one area for convince factor... Plus I live in Atlanta and this gives me an excuse to get out of the city. My question is why do people say mobile home parks are so "lucrative" or call them "gold minds"? I've run the number against my SFR's that I rent and it doesn't look that way to me. Am I missing something? I've listed an example below. My main concern is the ROI.
Mobile Home Park
-14 lots at 100% occupancy each rent for $225 separately metered.
- $225 (rent) x 14 (lots) x .70 (exp) x 12 (months) / .10 (cap rate) = $264,600
Lets say you bought it for that price and put 30% down @ 5.5% 20 year fixed and the banked loaned the other 70%. Your PMT is $1,274 (excel)
Net = $11,172 yearly or $11,172/$79,380 (.30 down payment) = 14.07% return on your cash
The more cash you spend the worse the return is.
2 SFR's
-Cost of house and complete rehab $90,000 (45k each) - No loan
-Both rent for $800 a month
- taxes, ins, exp total = $3,520 for both
- Net 15,680 yearly or 17.4% return on cash
The SFR will appreciate in value... I don't know how much a mobile home park will or won't.
I know the first thing someone will say is my expenses are to low for my SFR's. I've been fortunate and haven't seen anything more in the last 8 years with my properties so thats what I'm going with.
What am I missing? Even if I increased the expenses on the SFR's and decreased it on the MHP you'd still be at the same return.