Evaluating mobile home park

17 Replies

Hello bp, I’m new to the mobile home park investors group. I’ve flipped some sf properties and have a few rentals. I came across a mobile home park and was wondering how to figure out if it’s a good deal. I don’t have all the details yet but wanted to see if anyone can point me in the right direction. Thanks again.

I found out a few more details about the mobile home park. It’s a 10 home park. Most of them are 1970s mobile homes. 3 need to be removed. One person needs to be evicted. 5 homes paying 480-500/month. After hearing the details I’m pretty he’s asking too much. He wants 200k.

@John Hovanec I would look at it. $2500 per month is the gross rent. That's $30K per year gross, so $200K is a 15% Gross rent multiplier. I would like it at 20%. I would walk the property and see how flexible he is or if he would remove the 3 bad ones as part of the deal. It is a 10 trailer park with only 50% of the potential rent coming in. If you can get it to 100% occupied and paying, you would essentially double the value. 

@anthony Dooley
Thanks for the info. Should I be worried about the homes being from the 70’s. I know I would be able to move some newer ones in but that’s also more money. I’m new to the mobile home parks and just seems high 6 livable homes for 200k. I could make $3000/month without any more money inputted. I probably couldn’t find a bank for a loan on that old of properties. So I would have to use a private investor but would I be able to refi out of it? Thanks for any more info.

@John Hovanec , unless you live nearby and will be doing all repairs yourself I would run the other way. While the gross income is $3k a month, you still have taxes, insurance, utilities, etc. Plus, your initial expenses due to deferred maintenance will eat into most, if not all, of that. 

@anthony dooley When evaluating an offer price, would you take into consideration the potential for additional income gained once the empty lots are filled or would you strictly go by the current income and expenses? Because if he was to purchase the property, on day one he would not be operating at full potential and it would cost additional money to bring more houses into the empty lots. Would those initial expenses factor into lowering the offer price?

@John Hovanec I'm not saying to buy it today. Walk it, take a look at the condition of the homes. The 1970's doesn't bother me if it doesn't bother the existing tenant who lives there. Moving new mobile homes in there, one at a time, as cash is available adds value to your park in case you want to refinance or sell it later. This may not be the one, but the more parks you look at, the smarter you will get. MHP are an endangered species. Most places will not allow new ones. Also, the seller may agree to finance the deal. Put some money down and finance it for 10 years at zero interest. 

Very interested in this thread. I'm looking at a Canadian park, (because I'm Canadian...), so I know some things will be different, but premise should be similar. My concern is that I don't know what I don't know.. ie: spotting value add opportunities, where the park has been mismanaged, etc..

The listed expense ratio is just over 41% which I thought seemed high. Owner is out of town. It's an oil/gas/agri town about 2 hours from a major center. All owner occupied homes, and several RV pads for when oil season is going. 

What are some things I would miss during due diligence having only been in the new build apartment space before? Is there anyone in Canada, with experience in this space?

Hi..I recently read a rule on how to figure out valuation.  Formula is (# of Lots x Average Rent x 70)

Example: 5 lots x $490 x 70 = $171500.  If operator can get all 10 lots rented at $490 potential value is $343k.  

@John Hovanec yes be worried about the park owned homes from the 1970's as you can t cap that income towards the parks NOI. Id venture to guess that mh from the 70's are not worth jack squat and will need lots of up keep. Does the seller have the lot rent and the rent he charges for the mobile home separated on two different spread sheets?

You cannot buy am MHP and include the park owned units into the valuation of the park. For far more detailed explanation why look up "valuation of park owned homes" on google and zoom in on the mobilehomeuniversity.com site and read what Frank Rolfe has to say about this topic and you will thank me in the morning.