1st [Possible] Rental Property, A Mini Trailer Park Lot

1st [Possible] Rental Property, A Mini Trailer Park Lot

Real Estate Agent · Wichita, KS · Member since 2019 · 19 posts · 3 votes

Hello all. I’m fairly new to the BP community. I am 21 years old and wanting to begin real estate investing and building up my portfolio as soon as possible though. I have not yet made a deal yet but have been searching at possible ones. Lately one deal that has stuck out is described, “L-shaped property has 3 trailers on site 2- 3 bedroom 1 bathroom, and 1-3 bedroom 2 bathoom. Also has metal 18x24 garage with concrete floor. Single wide 3 bedroom 2 bathroom needs completely renovated or replaced. Other 2 trailers are rented with tenants. This is a project! And i have it priced accordingly. Right now all trailers are connected to 1 water meter that i pay but there are 3 new meters installed just need to finish running to each trailer then tenants would be responsible for their own water bills.” Average MH lot rent is $450. The amount the owner is wanting for it is $30,000. I was wondering if anyone could offer me some advice on how to properly evaluate this deal and what to possibly expect. I am interested in mobile park investing and feel like a small property like this can help get my foot in the door but I’m not 100% sure. I also need some advice on how I would go about funding this deal. I have $10,000-$15,000 that I could put down on it but don’t know how to come up with the other $15000-$20000. I was always taught that credit cards are “bad” so I didn’t get one until recently so I’m currently trying to build my credit score so conventional bank financing isn’t an option.. Should I wait until I build up a credit score that will allow me to get bank loans or try some other options that don’t require credit scores? If so, I’d really love to find out about different ways of financing an investment that doesn’t require a credit score. Thank you all in advance!

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Real Estate Broker · Kirkland, WA · Member since 2018 · 549 posts · 411 votes
7y

@Maksim Easley

This sounds like it could potentially be a great deal. The obvious way to finance it is with owner financing. Buy it for $30k, put $10k down and then make payments to the owner.

Sounds like it needs more than $5,000 of work to get it performing at a good level.

Is there room to add more trailers? How much will the garage rent for? How many of the trailers does the park own?

You could probably finance the whole thing off a prosper.com loan. Interest might be high...

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  • Real Estate Broker · Kirkland, WA · Member since 2018 · 549 posts · 411 votes
    7y

    @Maksim Easley

    This sounds like it could potentially be a great deal. The obvious way to finance it is with owner financing. Buy it for $30k, put $10k down and then make payments to the owner.

    Sounds like it needs more than $5,000 of work to get it performing at a good level.

    Is there room to add more trailers? How much will the garage rent for? How many of the trailers does the park own?

    You could probably finance the whole thing off a prosper.com loan. Interest might be high...

  • Real Estate Agent · Wichita, KS · Member since 2019 · 19 posts · 3 votes
    7y

    @Geordy Rostad thank you for the reply. I will need to get in touch with the seller and find out all that information! I believe the lot owns/comes with all three mobile homes, but I’m not 100% sure. It does not say how much the garage rents for but I’m sure it can at least rent for $25 a month as is or even more if I made it look a bit better. I don’t believe there is any room to add a trailer unless I get rid of the garage. & I will see if the seller would be willing to do seller finance as well as check out that site. I appreciate it!

  • Real Estate Broker · Kirkland, WA · Member since 2018 · 549 posts · 411 votes
    7y

    @Maksim Easley

    $25/mo?!?  No way, that's a giveaway price.

    What does a 10x20 storage unit rent for in your area? You need to look that up and then adjust your price from there. Is the garage 1 car or 2 car? Check some Craigslist comps too:

    https://wichita.craigslist.org/prk/d/storage-unit/6911227816.html

    If the park owns the trailers, that is the first thing you would need to fix. You want  the occupants of them to own the trailers. You just want to be renting the spaces out, not maintaining the crusty old trailers. You'd want to clean them up and sell them with owner-financing maybe for $3k-$5k/ea. Maybe more for the vacant one after you clean it up. Sell them on a contract for 18% interest or something. This would get you a much better income stream and drastically reduce your management effort.

  • Real Estate Agent · Wichita, KS · Member since 2019 · 19 posts · 3 votes
    7y

    @Geordy Rostad I am not sure about the size or condition of the garage by the pictures or description, but you are right, I never really looked into the amount it could bring but it looks like I’d be able to rent it out between $50-$100 a month at least. & that is a good idea to get rid of owning the mobile homes! I do not want to be responsible for them so I’ll definitely look into seller financing them if I happen to get them. This has been very helpful! Thank you. I’ll post more information about it if/when the owner replies since right now it’s a vague deal.

  • Real Estate Agent · Wichita, KS · Member since 2019 · 19 posts · 3 votes
    7y

    @Geordy Rostad What are your thoughts on this method of evaluating mobile home parks? I came across it earlier but don’t necessarily know how it works out the way it does and if it’s actually a decent rule of thumb to consider when searching. “A good rule of thumb that I use to start with is that I take the number of occupied spaces and multiply this by the average monthly space rent and multiply this by 70 (The "70" number is an arbitrary number based on my experience in evaluating deals).” Using this method, it makes the deal I found seem fairly nice but I wasn’t sure if it’s something you’d use on a small lot or not.

    https://www.mobilehomeuniversity.com/articles/evaluating-mobile-home-park-investments.php

  • Real Estate Agent · Salt Lake City, UT · Member since 2014 · 473 posts · 230 votes
    7y
    Originally posted by @Maksim Easley:

    @Geordy Rostad What are your thoughts on this method of evaluating mobile home parks? I came across it earlier but don’t necessarily know how it works out the way it does and if it’s actually a decent rule of thumb to consider when searching. “A good rule of thumb that I use to start with is that I take the number of occupied spaces and multiply this by the average monthly space rent and multiply this by 70 (The "70" number is an arbitrary number based on my experience in evaluating deals).” Using this method, it makes the deal I found seem fairly nice but I wasn’t sure if it’s something you’d use on a small lot or not.

    https://www.mobilehomeuniversity.com/articles/evaluating-mobile-home-park-investments.php

     Yep that's a good way to do it. Also you should run some test ads to confirm that $450/mo is what you could get for lot rent.

  • Real Estate Broker · Kirkland, WA · Member since 2018 · 549 posts · 411 votes
    7y

    @Maksim Easley

    Ya, I would just reiterate that you want to calculate your valuation of it based solely on space rents, garage rent, and actual total expenses.

    I have no idea what the expenses are. Let me try to guess:

    Income $17100

    mobiles 3*$450*12= $16,200

    garage $75*12= $900

    Expenses $5200

    landscape $600/yr

    w/s/g $2400/yr

    insurance $500/yr

    tax $500/yr

    maintenance $1200/yr

    NOI $11900

    Purchase $30,000

    Repairs $10,000

    $11,900/$40,000 = 30% cap rate

    I'm probably way off with all these numbers. You'll really want to run your own. You probably need more than $10k for repairs too. Could be a good deal if you can figure it out.

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