Mobile Home Park with 30 Units

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Mobile Home Park with 30 Units

J Berk
Brooklyn, NY · Member since 2017 · 28 posts · 2 votes
Hey all! I've been reading the forums and enjoying and learning from everyones input for a few years now. I'm in negotiations with a seller and would love some feedback from you experienced guys. Here are the details. -its a 5 acre seasonal park on a beautiful large lake near Cooperstown NY with 30 cottages all owned by the tenants. -it only operates from may 1 - oct 1 (5 months a year) the water gets turned on and off on these dates. - each cottage has there own septic which they are responsible for. The park supplies water from a well. -tenants currently pay 2000 per year. Most tenants have owned cottages for 10+ years and rent has been very reliable with 100% occupancy for the past 20+ years. -the park includes 60 ft of lake frontage where tenants are allowed to keep there boats and put there docks. The current owners allow the use of the lake frontage but do not have anything to do with putting docks in etc. This is all done by the tenants. -last 3 years operating expenses were just about $10,100 a year. Pretty much all that needs to be done is mow the large 2 acre lawn and maintain the water system. - so the numbers look like this $60,000 gross income, $10,000 operating expenses = $50,000 net operating income. So i'd love some input. What is this park worth? What should i offer? Owner financing is definitely an option. What is a fair term and rate for owner financing? Looking forward to your input guys! Best, Jon
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Account Closed
Johnson City, TN · Member since 2014 · 586 posts · 705 votes
9y

You aren't going to get money a great deal cheaper than this on an investment property. Would they take a lot less for a all cash deal? I have carefully read all of your posts and what I am taking away is that this is a very emotional thing for you and you are hoping to hang on to the past and create a future here also. I am afraid emotions are clouding your business decision here. I see a lot of things that can go very bad with this deal. You say that you plan on holding this property forever, but life has a funny way of changing things. Always have an exit strategy.

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  • Account Closed
    Johnson City, TN · Member since 2014 · 586 posts · 705 votes
    9y

    @J Berk I am kind of shooting blind with your situation because I don't really have anything to relate it to even though I own a mobile home park. My first consideration would be whether this property was eligible for traditional bank financing when the rental income is considered. I know you don't need bank financing, but if your plans change you may have to sell to a buyer that needs traditional financing. This would be a deal breaker for ME. My next concern would be the septic situation and if it can be grandfathered in. You say the cabin owners are responsible but how much would it cost them to put in a proper system? Will that be feasible from a cost standpoint? I would then turn my attention to the water situation. You mentioned a backup well in the event the spring failed. Is it capable of supplying enough water for 30 cabins? Lastly, can these cabins be replaced legally? I just thought  about this disastrous situation. If the cabins cannot be legally replaced, what would happen if a fire swept through and destroyed several cabins? Are they insured?

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  • J Berk
    OP
    Brooklyn, NY · Member since 2017 · 28 posts · 2 votes
    9y
    Tim Chapman Thanks for the insight! There have been 2 cabins replaced in the last 5 years. One was due to a fire. The cabin burned up pretty bad. Luckily there was no damage to the surrounding cabins. They had insurance and was able to replace the cabin. It seems the zoning is very relaxed. The second cabin was replaced with a trailer. The codes enforcement officer was involved in this and was actually a pain in the butt. However, the tenants were able to get the trailer in and satisfy the officer. I will look into getting a flow rate test for the backup well. I have had well issues with another investment property and know how expensive that can get. After looking at the local land use regs today. It looks like if a septic is existing before 1989 is can stay, but if it ever needs to be replaced due to failure it must be up to code. Would LLC . What kind of insurance coverage limits would you have on a property like this. I imagine the lake may be a liability. Where is your trailer park and how many units?
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  • Account Closed
    Rental Property Investor · Friendswood, TX · Member since 2010 · 663 posts · 508 votes
    9y

    J Berk, the price is too high for what it is based on the info you have provided.  Raising the lot rent 100 per year is not going to solve this . Are there another parks that have year round rental where you can instead get 4200 for the year?  

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  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    9y

    Your posts indicate you are not paying any attention to any advice provided you only care about how to purchase as you have already made your decision.

    Unfortunately the day will come when the government environmental agency will step in and there will be responsibilities to account for. The likely hood is that based on the age of the community the cottagers are polluting the lake, E.coli counts are probably up in the swimming area during the summer after a rain and at some point it will be discovered. Guess who is going to be held responsible to shut down the community and possibly spend hundreds of thousands to clean up the environment, That's right the property owner.

    Environmental agencies are clamping down across the country and you may find that a change of ownership may bring them down on you.

    To do this right you must have a environmental study completed as your due diligence during the purchase process, make sure it is done in the summer months when the home are used the most.

    If it passes, which it is highly unlikely, and you purchase you must insist that every cottage install a proper septic system. You due diligence will also determine if proper septic is even possible under the circumstances.

    Do not enter into this purchase with any emotional attachment or you will be facing potential bankruptcy. This is a business investment that you had better take very seriously.

    The value of this property with a 10 cap is at maximum $420,000. In my opinion a 10 cap is low based on the high risk factors and should be closer to a 15 cap at least, I would not pay a dime over $400,000 as a serious investor.

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  • J Berk
    OP
    Brooklyn, NY · Member since 2017 · 28 posts · 2 votes
    9y

    @Thomas S.

    Greg,

    Thank you for you advice.  Yes, I really do want to buy this property, but I will first absolutely perform the due diligence you've described.  How do I go about getting an environmental test and what would the test be called?  Would it be a soil sample taken near the lake.  The nearest cottage is 100 yards from the lake.  It's a little walk to get down to the lake.  There are 100s of other houses (very old) that are literally 15 feet from the lake.  I would hope that if there ever is a requirement for all septics to be updated that the houses literally 15 feet from the lake would be the first target.  

    I will call my lawyer in the morning and have him look into the local laws further and if it would be possible for the park to be brought up to date.  As I mentioned a new cottage went in a few years ago and it was all done to code.  They have a new septic tank,  I hope this is indicative that this will be able to be done with all the other cottages.

    Thank you again for your advice,  I don't want to purchase a headache!  Would greatly appreciate more input!

    Best,

    Jonathan

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  • Rachel H.
    San Antonio, TX · Member since 2009 · 3k+ posts · 1k+ votes
    9y

    I've seen this scenario work but operation has been year round. For the off months, you'll have to figure out how or if you can derive income to help offset expenses. If the seller is willing to work with you and provide the documentation you need (i.e. rent rolls, tax returns, invoices on work done, etc), you may be able to work something out. Good luck! 

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  • Paul Cmil
    Investor · Allentown, PA · Member since 2017 · 6 posts · 2 votes
    9y

    I go back to the "septic system" I don't think it is going to fly. I think that was considered a cesspool when it was first put in place. see what the township says about replacement. They may want the system redone at transfer. I ran into a problem with a leaking tank once and that is not pretty.

    someone pumps those tanks out. Get an assessment from him on the condition. 

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