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Mobile Home Park Investing

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Chris Majors
  • Rental Property Investor
  • Evans, GA
65
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74
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Would you buy this "mom and pop" 7 unit park?

Chris Majors
  • Rental Property Investor
  • Evans, GA
Posted Mar 28 2018, 16:35

There is an older MHP in my area that I have been keeping tabs on for a couple years.  It's not the prettiest thing but throws off decent cash flow for the investment.

The property is just under 3 acres with 6 leased lots with tenant-owned homes and a 2/1 block building.  The lots are leased below market at $155/unit and the apartment for 450/month.  Two of the trailers share a septic and the other units have their own.  There is county water that is billed back to the tenants.  The trailers are a mix of 70's single wide's and 80's double wide's that have little value.  The block building is in relatively decent shape, being remodeled about 10 years ago with new wiring, windows, HVAC, etc.

The trailer park next store door is getting 200/month lot rent and you could rent the 2/1 for $585 section 8.  Other parks in the area are getting $250/month with no amenities so there is definitely some value-add by increasing the rents.

Rental demand is very high in my market and I could see rents increasing in the future.  I am a little concerned because the trailer parks are now not conforming.  According to the seller if a trailer becomes vacant the county will give you 2 years to get it occupied/put a new trailer on the lot.  This used to have 8 rented lots, but the seller decided to do anything with 2 of the lots so they are unusable.

*Current numbers*

Gross income: $1,380/month or $16,560/year

Taxes: $67/month or $800/year 

Management: I will be doing this myself with my team, but I am thinking around $250/month or $3,000/year

Maintenance/Capital Expenditures: $250/month or $3,000/year

Vacancy: I'm thinking very low since the trailers are not park-owned, but I figure 5% is fairly conservative. $69/month or $828/year

Net Income: $744/month or $8,932/year.

The asking price is $75,000 and the seller indicated it was negotiable. Owner financing may be an option, but the seller would prefer a cash deal. Based on my numbers I could pay the asking and get about 12% COC with no leverage. If I increased the lot rents to $200/month it would be 16%! These are pretty sporty returns with no leverage.

My main concern is the amount of time it may take to manage and the age of the mobile homes.  I'm hoping some seasoned MHP investors will give me some pointers on evaluating this potential deal.

Thanks so much!

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