Mobile Home Park With Cash

[Michael Hooper]

I've found a mobile home park with 9 mobile homes (owned by the park, not the tenants) and a house on the property. Each unit is rented out month to month at about $350 per month. The rent roll look a little sporadic. ranging from about 60% occupancy to 85% occupancy. Its $150K. I've got the cash to purchase it, but I don't want to tie all my cash up in that investment for long. Is it relatively easy to do a cash out refi on a mobile home park, or should I seek to just purchase with a loan. I've only owned 1 rental property before, and I've also rented out rooms in my home. Is it a good step to move to a mobile home park? Or should I do something else before moving into a mobile home park?

[Curt Smith]

@Robere Istatia I agree with you re lonnie deals, but the poster was saying hes pondering buying the park, just the homes.

@Michael Hooper 1st, lets consider investing that cash in a foreign high yeild bond fund, you should be able to get 10% and zero effort.  Just collect dividend checks.   

So all alternatives need to return much higher return or they are just bad deals, right?   We don't buy real estate (houses) or businesses (commercial) because its so dang fun you can't stop.  :)

I'm a part owner in park, have taken Frank and Dave's mobilehomeuniversity dot com boot camp and can read between your lines.

- Poor payers.  They need to be booted out

- low home rent.  $300 is way too low home rent to interest me.   Our lot rent is $400 and its in S AL.

- I bet this is a high effort business to own and operate.  Why on earth would you want to put cash into something and have to work like heck?

Banks do not lend on rough around the edges deals like this.

FWIW my valuation based on the same formula park appraisers use is:

10 lots x $300 home rent x 12 x 0.3 (70% expense ratio given the intermitant payers) = $10800/yr

Small PIA parks like this need to trade at least 12% cap rate, which means:   

10800/0.12 = $90k

Me I would need 15% cap to take what amounts to a junker deal or 10800/0.15 = $72k

Bottom line this deal throws off only $10.8k per year after expenses.  This is not interesting enough for me especially given the PIA each month.  

Go find a local REIA and find who's wholesaling SFRs and get bank financing to buy a bunch of SFRs with your cash used for down payments. My SFRs are 1/10th the effort vs the park that is lot rent the prefered park configuration. Folks under estimate the work in running a commercial business. Where SFRs are much simplier. To learn to manage SFRs go to David Tilney's landlording training (googlable).