Mobile Home Park Raleigh NC
I’ve been actively marketing and underwriting mobile home parks in NC for the past 6 months and have found a few viable opportunities. I’d like to run this one by the group to get feedback from experienced operators. I’d also like to offer joint venture partnership for anyone interested in joining me on the deal as I think there is some strong opportunity here.
The Mobile Home Park is in a Raleigh NC suburb (not a “MSA” zone 50 miles away, town is directly adjacent to Raleigh within the beltway). The county and central part of the state are booming, with many folks inbound for jobs, climate, etc. The area constantly finds itself on the top annual lists for best places to live.
The park is owned by a “good ‘ol boy” that lives close by, turns out we grew up in same rural county and share some other interests so it was a good connection. He paid cash for it 15 years ago from another land transaction, is now 70 and wants to pass along to someone else so he can enjoy the rest of his life. He’s worked on/in the property daily since owned and knows everyone there, even has a few family members living there. Mainly collects monthly rent payments in cash, and rents are substantially under market (at least $50, possibly $75-90). It also sits on 40 acres +/-.
Its 40 full lots with 8 park owned homes. Each lot has its own septic tanks. Well water from a 300’ well, has monthly checkups done via contract. Supposedly never had a problem w water. Lot rents are $250/mo. Actual expenses are very low as he does a lot of work himself or via tenants in trade. I’m aware these will go up if I buy as I’d prefer to run it as a business w onsite manager, repairman, etc.
At 10 CAP, current park valuation is ~$850k @ 30% expenses + 8 POHs @ $10k ea, total value is $900ish. Once rents are raised to market, its prob $1.1M ish.
He's asking $1.2 Cash or will carry for $1.3M w/ $300k down, 10 yr balloon w/ $5k monthly payments. At an 8 CAP, we're a lot closer to asking price. On a long term play, there's also pretty decent potential for commercial redevelopment over the next 5-10 years as the county is rapidly developing all over. It should certainly be able to carry itself in the meantime.
Am I valuing this correctly? Do typical expenses on septic/well substantially exceed 30%? I appreciate any feedback on this one.