PAY FOR EVAL OF MHP?

Question

I'm still looking at this MHP that has 25 pads and 25 septic systems.  Water wells x 2 are the water supply.  Everything else makes sense, but clearly, I don't want to be wrong.  I like paying experts for their brains.  Anyone done this?

Anna Catron · Answer

WOW!  Such fabulous people being so generous with their brain power!  I appreciate your information more than you'll ever know!

Amazing, thanks so much!  The test ad is in place!  I'll start digging into all the information you just gave me!

Frank Rolfe · Answer

Sorry I did not see this until right now. My apologies. I'm on the road driving parks.

Here's the rough form of the value of this deal.

22 lots x $190 x 12 x .6 = EBITDA of $30,096 per year.

Plus 3 stick builts at (I'm assuming $600/mo rent per house) = 3 x $600 x 12 x .6 = EBITDA of $12,960 per year

TOTAL EBITDA OF ROUGHLY $43,000 PER YEAR

Assume a 8.5% cap rate = $505,882.

Then you add the the value of 9 1990s POHs at maybe $10,000 each.

$505,882 in real value plus $90,000 of personal property = roughly $600,000 in value for the park as it sits.

Your upside is in filling the remaining vacant lots, pushing the rent to $250+ over time, and renting the 6,000 sq. ft. building.

Your greatest risk is the private water/sewer system, and the demand in a metro of only 33,000 (TEST AD ESSENTIAL).

The potential value of this park is 25 lots x $250 x 12 x .6 = EBITDA $45,000 plus 3 stick builts x $600 x 12 x .6 = EBITDA $12,960 plus 1 commercial building $1,500 x 12 x .6 = $10,800 = TOTAL EBITDA OF $69,000 AT 8.5% CAP RATE = $811,764.

The risk/reward scenario is decent because if you pay $600,000 and sell off $90,000 in mobile homes, you have $510,000 in deal and, assuming 25% down, you have invested $130,000 down and, if you can bring the park fully back to life, you have a profit of around $300,000 on your investment of $130,000, which is about a 2 x multiple which you should be able to harvest in less than 5 years if you work really hard and did great due diligence.

Mike Reynolds · Answer

I think @Anna Catron tagged you but it didn't take.

Anna Catron · Answer

@Frank Rolf

Anna Catron · Answer

Yes, your book was already in the mail to me, thanks!

45 acres, 7 minutes from downtown of a metro area of 33k. SF median 101k. 3BR appt $1090. 25 spaces:TOH/POH 13/9.

3 stick builts zillowed at 10-70k.

LOT RENT $190. In the nicest park in town I've found lot rent $250.

MHomes mostly 1990s. $650 rent for POH.

6000sqft concrete floored storage building-electric and plumbing.

2 wells and 26 septics-that's my biggest worry.

There are at least 11 MHPs here already, but I do know one that must've read your book bc in 2 years she's made it BEAUTIFUL!

Thanks a million! I can't believe a big wig like yourself is being so generous!!

Frank Rolfe · Answer

I wrote a manual on that called Thirty Days of Diligence that tells you exactly what you have to do on any park to perform correct due diligence. But it sounds like you're just wanting a macro overview of the deal. If you'll post how many lots are occupied, what the lot rent is, what the market lot rent is (a guess even), the age of the homes (roughly), how many homes are park-owned, what the park-owned rent is, and how big the metro is, SF price, and 3 BR apartment (pull from Bestplaces) --  BUT DO NOT POST THE CITY OR STATE SO NOBODY KNOWS WHERE THE DEAL IS -- I'll give you a quick evaluation right here.