I found a small 6 unit mobile home park for sale in my area (D+ C-) they rent for a combined 4,800 a month. Tennants are set up on a 6 month lease and pay by the week. There is a 200 per month allowance for utilities and trash removal cost. 4 of the 6 units are pretty old. I have not seen the owners cost of doing business yet. My research yields 400 per month ins cost including 2 million general liability. The sale price is 145K (29k down) by my calc, thanks to BP is: 27% ROI; 731 CF; 14.15 Cap rate. I calculated 30% on the expenses 1440 per month (matainenace and repairs, cap exp, vacancy).
Good deal or a bad deal? Is there anything that I am forgetting? Being it is 6 mobile homes does that throw it into a commercial loan, or different set of circumstances that I sholud be aware of... and if so what are the ramifications compared to SFR?
Thank you, Tim
@Tim Nicholas It is hard to say if it is a good or bad deal since we don't know your goals, experience, and skill set. For me, there is no way I'd buy six trailers that are on weekly rent in a C- area. That is just me, though. I'd look at this deal no differently than a six unit apartment building because that is what you are getting.
You are missing PM Costs, even if you'll self manage. Is it public water and sewer?
If the deal does fall inline with your goals, I think the asking price is in the ballpark for what is fair. The park is worth around $100k assuming $400 lot rent, 50% expenses, and a 13 Cap. Then it is just a matter of figuring out what the trailers are worth,, but the asking price puts them around $7.5K each.
Thanks Bill for your response. I am curious as to why you would not buy a 6 unit apartment that paid weekly (I'm assuming the weekly collections) can you elaborate a bit more on that? I'm seeing $ signs but that isn't always the best indicator. Some things are hard to grasp until you feel the pain.
it is under public water and sewer. This would be my third rental property. I just bought my second last month and is undergoing rehab. My goal is to have 30 doors in the next 5 years cash flowing about $200 ea. then retire from my day job spend time with my grandchildren, focus on the church and people.
I rent RVs that people live in. I collect rents on a weekly basis. Yes, it's not for everyone. But I feel the extra rent you get is worth the extra trouble.
You say $4800 a month income. How much is the weekly rent?
I would be very interested in this deal. I'm sure you know already that it's very important that you see the actual income and expenses for this property, so you need the bank statements.
@Tim Nicholas you have a great why and a plan to get there!
Not the weekly collections per se, but more what they signify. Weekly rent signals, to me at least, a tenant class that is either transient or has cash flow problems, self imposed or not, that they can't or won't pay monthly. This also signals higher expenses and turnover costs, which are not easy to predict. All of this means more time spent managing the property and solving other peoples problems. Also a six unit park with all POH will have a hard time appreciating since such a significant portion, around 1/3 in this case, of the value comes from the homes, which depreciate.
Again, all of this is why I would not do the deal. It boils down to not being interested in managing the type of tenant class. No I have nothing against C-/D+ tenants, they deserve a clean, safe, and affordable pace to live just like everyone else. Based on my knowledge, skills, abilities, and personality; I'm not the best person to provide it. Plenty of folks do very well in this space and you may be one of them.
When I re read your original post do you think the total expense are $400 per unit or the $400 per unit you researched plus the $200 for utilities and trash?
Double check your state & county laws...I do know in my area, there is a 10-unit minimum threshold that puts it into the MHP class. 6 units may end up in a different class, zone, etc.
Myself, IF the area is conducive to it, i would buy it, rehab them all with different themes (like swampland, big easy, etc.) and create a cool Air Bnb rental "compound", where could get $50-$100 a night income per unit. Run & build up the biz & occupancy for 2 years, then re-sell for a whole lot more.
@Tim Nicholas Try to get actual numbers from the owners. If you can get the rent roll and all work performed on the park in the past few years, that will help. Also, if you can get IRS tax returns it will show what was submitted to them. Good luck!
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