Mobile Home Park Questions and CAP rates and your input needed.
Hey everyone, I was wondering what the typical CAP rate is for parks. Seems to me that it is usually higher than lower but I wasn't sure. Looking on Loopnet they are all over the board and I know if varies based on area. Seems like a lot of multifamily stuff around here is around 8 which to me doesn't seem to great. I try to look at things with a 10% rate for running numbers. Is that not a good idea?
Anyway I also have a small park that I wanted some input on. Here are some numbers.
24 Spaces total @ $230/month $66240.00
Less current vacant spaces (5) $13800.00
Adjusted Gross $52440.00
Expenses for 2016
Insurance 575
Professional Fees 748
Misc Office 143
Repairs/Maint 317
Property Taxes 7727
Trash 3443
Postage 96
Gas for lawn mower 381
Bank Charges 76
Total Expenses $13506.00
NOI $38934.00
All those numbers are from the realtor. The park is nothing special but it is decent for the area. Just gravel area and not paved in the park itself. It is on city water and sewer and metered separately to each place. Garbage and taxes take out a huge share. One thing I don't see if snow removal which kind of surprises me a little but maybe they don't do anything for that. Also no property management expense. I am pretty sure the owner does it.
I see maybe a few pluses, maybe save on garbage depending on the size of dumpster and the company doing it. There is 5 lots open so if they got filled eventually that would bring in another $13800.00. But that might be a tough sell because of the year limitation that city now has. But personally I would like to fill the 5 spots with my own homes so then I get added rent so instead of 13800, it would be around $45000 based on average of $750 rent. Yes I know not ideal because then there is more hassle and issues to deal with but I already have 5 homes in various parks that I have to deal with.
Rents are at $230 now. In the same town I pay $275 (garbage included) and $225(no garbage) on some of my other ones. Lot rent prices vary in the 10 a mile radius from the $225 to up to $375. Might be possible to raise rents some or take away garbage and have each one get their own service. But getting their own would be a hassle I would think. The cost would be about $23 each per month.
What is it worth? Is it ok to barley make anything after debt service? I checked a local portfolio lender and they are 4.75-5.75% for 20 yrs and 20% down. Cash down is an issue as I own most of my stuff outright and also have on CFD house tieing up 90K. I have equity in my home which I can use if I have to for the down but then that is another payment on top of the PITI of the park. Already checked on owner carry and that doesn't seem to be something they want to do.
I make great cash flow on my single mobiles I have but I guess I am looking at it long term and keep thinking that 24 unit park is alot less headache than managing 24 tenants and all the issues that go with it if you owned all 24 homes. So that is why I am tossing up this idea of the park.
Just wanted to see what everyone thought. Thanks for any input