Valuing a Mobile Home Deal + Insurance Question
Hello BP Community.
I have an opportunity to purchase a 24 unit mobile home park in the greater Orlando, FL area. 23 of the pads have mobile homes and 7 of those are park owned. I have three questions I would love to get some help with. I will elaborate more below, but here they are for brevity sake.
1) How much would you value this property?
2) How can I insure against a catastrophic loss (e.g., hurricane) that may cause me to lose rent for years?
3) What is the best approach to the 7 park owned homes?
4) Laundry facility vendors?
5) Financing
1. Value of property-
Here is the information I have so far for this off-market property.
-1.2 acres, built 1972
-current seller paid 390k for it 9 months ago
-23 units on property with one vacant- about half of residents are snowbirds
-pads rent for 325/mo, 7 homes rent for 700/mo- Any tips for finding market rates? Can I raise these to 375? It seems like a fairly large fixed cost to move your trailer so I assume raising these is relatively safe.
-city sewer/water (I am not sure if master meter or if included in pad rent price, but will find out)
-Laundry room, workshop, paved road
-I am not positive, but believe it is 55+ community
-Gross Rents= 121,200
-Expenses: Vacancy- 9,696 (8%), Insurance 2,500, Taxes 7,000, Management (8%)- 9,696, Maintenance/Repair (5%)- 6,060, Garbage- 2,000, Lawn- 2,500= Total expenses 39,452
-NOI= 81,748- One question here, should I be including the payments for the 7 park owned properties? I have seen others mention I should just calculate the pad rentals for the NOI. If I just look at pad rents and also im ignoring laundry, NOI drops to 56,863.
I am also calculating a 5% capital expenditure budget, but taking that out post NOI- another 6,060.
-Cash flow before tax (keeping the park owned home rent in calculation of NOI)= 25,121
-Cash flow after tax (assuming 35% marginal)= 20,389.
-If I can raise the rents to 375 and I assume a bit lower vacancy rate (5%) and self manage the property. NOI comes in around 100K.
Anything else I should consider?
2. How can I insure against a catastrophic loss (e.g., hurricane) that may cause me to lose rent for years?
Because this is in FL, I worry that a hurricane could wipe out all of the properties. I am hoping to sell the park owned homes to the tenants so would not be worried about the park and would have insurance for the minimal land structures. However, if we had a hurricane event, we would lose rents for a sustained period of time if all the homes were destroyed. What is the best way to think about/insure against this risk?
3. What is the best strategy with the park owned homes?
I would prefer to keep this low maintenance, so I would like to sell them to the current tenants. I have heard others mention collecting 1k-3k down-payment and then amortizing over a 3-5 year period for the tenants. This takes insurance off the table for these as well as repairs and puts them as the onus of the owners. If I did this for the 7 park owned homes, I could gain 7k-21k up front and then continue with the pad + monthly payments (keeping them at the 700 number they are currently). Is this realistic? Will the current tenants be interested?
4. Do any of you have vendors who service the laundry facilities? I have no interest in doing that.
5. Seller is a partner for a hard money lender and said he would finance. What kind of terms should I expect? I assume that my negotiation will be on the terms of the loan as well as the price of the property. He mentioned that I need to bring 20% to the deal. I am thinking 6% with 1 point over 20 years. Are there lenders who specialize in mobile home parks?
Thanks all!