Unexpected costs in a Mobile Home Park

[Andrew Mettille]

I just started to look at my first deal in a mobile home park. I was wondering what some of the unexpected or overlooked expenses in owning a mobile home park, assuming that all of the homes are resident owned.  Is there any potential big expenses that i should be aware of?

A little about the deal:

15 lots one empty being used as parking(additional land that could fit 3 more units)

1 owned by current owner(I would be selling asap)

City sewer and water

2.43 Acres 

$208 a month lot rent

$119,000 asking price

Broker owned

Seems like it could be a pretty good deal, will be finding more about it this week.

Thanks for any help and info

[Frank Rolfe]

14 lots x $208 lot rent x 12 months x .5 (net of expenses) x 10 (10% cap rate) = $189,280. At $119,000, that's a terrific price, which equates to around a 16% cap rate. I'd tie it up under contract immediately, and do some proactive due diligence on it.

The biggest "hidden" cost in most deals is the ramification of private water and sewer, which this deal does not suffer from. Of course, you'll need to confirm the revenue and expenses, and make sure that the title, survey and Phase I are clear, as well as get a firm handle on the market, but I would not delay in signing it up with a due diligence contingency.