Help Analyze Mobile Home Park! -rough numbers attached

[Kyle Grimm]

• 22 Spaces
• 4 vacant lots (1 of those is too small to put trailer on)
• 1 park owned home needing renovated but will bring in 450$ additional income once 5k dumped into renovations.
• Park manager gets free lot rent 
• 16 lots currently collecting lot rent for gross annual income of 42,168
• City Water/City Sewer 
• Tenants pay all utilities besides water (water paid by owner)

I feel that my expenses as listed in my rough numbers are very low.  These are numbers I got from the owner which I know is not always a trusted source.  Tenants currently pay all utilities besides water which is on one master meter paid by owner.  I have already been looking into sub-meter the park which would knock down my annual expenses down to around 9k (I asked for water bills from seller and they are around 9,659 per year). 

I have talked to owner down from 355k to 280k.  Rents are right around market rent but I could probably bump them up 15$.  After submetering the park and filling the vacant lots, the numbers would look a lot different.  I am curious what some of you experienced investors would think about this park.  Something to move forward on or keep looking?  Love to get some feedback! Thanks!

[Neil Schoepp]

Looking at this there are two things that pop right of the sheet to me. The first is the low cap rate.  I wouldn’t consider a park that had a cap rate just slightly above my interest rate. I look for a 3 point spread minimum. The next thing is I never pay for work I have to do. (Please take this as conversation not I think your a dope.) it sounds like you may be thinking that if you fill those  5 vacant lots this deal looks pretty good. That just means that you are paying the seller for work that you are going to do. I don’t pay the seller for the work I am going to do to get those pads producing. If the seller wants to get paid for them then they have to put the work in. I don’t buy and hope I can fill those pads, I buy cash flowing properties. If I fill those spots then that is work I did and will be frosting on the cake. With these numbers my offer price would be 170 and I may come up to 200. He is asking a 5 cap. Does he even know how parks are underwritten. How banks are going to look at this? 

The last thing I will bring up is make sure you read the leases to make sure there is no wording to stop you from sub metering the water. ALWAYS read EVERY lease.