MHP Deal Analysis Seeking Review

[Jason Harper]

Hello All!  This is my first post on bigger pockets.  I was wondering if I could get some feedback from seasoned MHP investors on the following potential deal:

21 Owner Occupied Lots @ $225-$235 

5 Rentals Units @ $295-$365

22 Vacant Lots 

1 Stick Built Home Sold on Contract @ $595

Average Monthly Income: ~$7,005 which equates to ~$260 per lot

Gross Income Income: $84,060 

Expenses:

Landscaping / Maintenance: $8,350 (9.93%) 

Insurance (liability only): $250 (0.30%) 

Real Estate Taxes: $8,400 (9.99%) 

Utilities: $2,700 (3.21%)

Administration: $1,800 (2.14%) 

Waste Management: $4,600 (5.47%) 

Total Expenses: $26,100 (31.05%) 

Net Operating Income: $57,960

Assuming a 10% Cap rate the value of this property today would be $579,600. 

The MHP is almost 40 years old and made up of mostly single wide trailers. The MHP has 2 wells and its own septic system. Do you guys see any red flags and what would you offer for such a MHP?

[Account Closed]

Originally posted by @Jason Harper:

Hello All!  This is my first post on bigger pockets.  I was wondering if I could get some feedback from seasoned MHP investors on the following potential deal:

21 Owner Occupied Lots @ $225-$235 

5 Rentals Units @ $295-$365

22 Vacant Lots 

1 Stick Built Home Sold on Contract @ $595

Average Monthly Income: ~$7,005 which equates to ~$260 per lot

Gross Income Income: $84,060 

Expenses:

Landscaping / Maintenance: $8,350 (9.93%) 

Insurance (liability only): $250 (0.30%) 

Real Estate Taxes: $8,400 (9.99%) 

Utilities: $2,700 (3.21%)

Administration: $1,800 (2.14%) 

Waste Management: $4,600 (5.47%) 

Total Expenses: $26,100 (31.05%) 

Net Operating Income: $57,960

Assuming a 10% Cap rate the value of this property today would be $579,600. 

The MHP is almost 40 years old and made up of mostly single wide trailers. The MHP has 2 wells and its own septic system. Do you guys see any red flags and what would you offer for such a MHP?

Just some general observations on this.  I would look at the market .  As Frank and Dave say you want to be in a MSA area of 100k plus, house price over 100k, good 2 bed rents in proportion to your lot rent price.  Since this park is half empty, is it because there is no demand in the area? Your landscaping cost seems high but it could be that you have a bit of additional land you have to pay to mow, or maybe its included in the rent.  Your insurance is going to run you more. The park is on well and septic. Your proposed expense do not include repairs/reserves for those.  Your Admin wouldn't be enough to offset a manager cost. 

Now here is my personal feeling which i can be wrong here.  But when a deal like this comes about you have to buy them so on the cheap it would not make sense otherwsie.  I don't think you would find a buyer in a million years to pay you a 10 cap on this property ( granted we don't know the market so maybe you are in a super great spot with below market rents by 200) .   

Also, the note people would have to chime in on the house but you have to provide more info like the note balance, rate, seasoning etc.

I feel like it will not have any liquidity when you go to sell so you have to buy it enough that it cash flows so well which is your hedge from not being able to sell easily.  I could be wrong on this but thats almost my automatic assumption on a smaller park  on septic and well.  

Quick math on lot rents running at a 50% expense ratio and using a 10 cap value is looking like 350k.  So you would have to substantially below that maybe a 15 cap at 230k.  Really though its good to look at a lot of deals until you get a grasp on it but unless there is a reason you are in love with it or you get it for a song, there are better opportunities out there. If its local to you and you really like it just keep some of those things in mind.