Is there any content you would recommend for learning this skill? I own SFR rentals, but mobile homes seem to be a completely different animal. Should I target park with owned mobile homes or just parks that collect lot rent? Any advice is appreciated.

@Austin Works I have found the materials from Mobile Home University (www.mobilehomeuniversity.com) to be extremely well done and helpful.  There is also a forum on the site that is dedicated to all things Mobile Homes.  I am of the mindset that I want to be in the land rental business and not the mobile home rental business due to a myriad of factors most notably turnover in tenant base and maintenance costs but it is extremely difficult to find parks where you will not have at least a mix of both.  I just try and look at parks that skew towards majority tenant owned.  Best of luck!

There is plenty of free material and material that you can pay for. General rules of thumb exists In the business. Like if it’s city water and sewer your going to be In the 30%-40% expense ratio. Depending on whether you or tenant pays for water or sewer. And this assumption only holds true if you have a park greater than or around 25 lots and lot rents aren’t below $225 or so

If private utilities or mixture of city water/sewer your expenses are going to be 40-50% range. 

Also there a lot more factors that go into underwriting a deal. Like debt, location, age of homes, infrastructure, density, POHs vs TOHs.  How many filled lots. How many vacant. 

Any questions please reach out 

@Austin Works You may want to start reading a few books on the subject. From there, you can figure out the process of how mobile home park investing works. Hope that helps! 

@Austin Works to properly value a MHP or RV park requires a fairly deep understanding of how they will operate, given all the potential variables. Some of those variables are the size of the park, number of vacant spaces, number of POHs, number of vacant POHs, number of MH spaces, number of RV spaces, the park amenities, the age of the park, underground infrastructure age and condition, park location, size of the market, value of SFR in the market, water or well, sewer or septic, other utility sources and whether or not they are direct billed, deferred maintenance, cost of management, and more. 

However, there is a basic "back of the napkin" evaluation that will usually tell you if the deal is worth a closer look. That formula is the NOI times a market cap rate. Calculate the NOI by multiplying the number of spaces by the lot rent, and then multiply by 12 months, subtract the expenses (can range from 30-50%, that % depending on the variables above). Once you have the NOI, divide the NOY by the market cap rate (in today's market conditions, the cap rate will likely land between 6% and 9%, depending on the market you are in. So if you are in a 7% cap rate market, you would divide the NOI by .07 and that would give you the value of the asset.

That valuation will tell you if the price expectation from the seller is in range or not.  If it is close, then it deserves a closer look.  If it is way off, you will need to understand why.  There are cases where other income from laundry, a C-store, a restaurant, or something like that deserves additional evaluation, so make sure not to punt before you understand additional income.  

Also, there are cases where the expenses will be higher, particularly in an RV park that has a large amenity package and daily RV traffic.  

All the best,

Jack 

@Rachel H. , any recommendations for good books on the subject?

@Jack Martin , this is so different from everything I know about SFR. Is the goal to buy at the fair value based on NOI and cap rate, or do you still aim to only buy at %80 or below of that value? I just don't want to waste time making 80% offers if others are going to be offering fair value.

Originally posted by @Austin Works :

@Rachel H., any recommendations for good books on the subject?

 Sure thing. Feel free to PM me and I'll send you a list of books and resources. 

@Austin Works in this market, if you are competing for a property you'll l likely have to pay fair value for the in place NOI.  However, if you are the only one at the table, you might be able to approach it differently. 

@Jack Martin A mobile home park came across my desk today. If you are interested, I can email it to you.