Mobile home park evaluation

17 Replies

Hello, new investor here and I would love some help evaluating a deal. Local mh park right down the road from my house, 10 old park owned mobile homes, small run down 6 apartment building, small stick built cabin. All rented between $350-550 per month. Current net income for sellers @ $55,000 without a mortgage. The park is 4.5 acres zoned fo 8 units per acre. Good location B area, but the park itself is a C. Water is well, sewage is city. What would you offer here? How would you turn this park around? Looking for possibilities and opinions. Thanks!

Thx for the reply. There are 10 MHs, park owned, and room for about 5 more as it sits now. Zoned for 8 per acre 4.5 acres. Small 6 unit apt and run down stick built cabin also on the land rented out. North Florida rural area. All old and run down. Needs turn around but may be worth it for the right price and with the right strategy. Thoughts?

@Margaret Bass

There's certainly not much info to make an offer. However a few key points:

1) You said it's located in rural Fl. How rural? Is there still a demand for such housing type? 

2) If you're were to renovate 6 units and up the price, would you be able to find tenants for higher rent?

3) If you were to renovate the mobile homes and increase the rent, would the tenants stay? would you want these tenants to stay? would you be able to find the new ones?

4) commercial real estate is typically valued on the NOI. You got to do your calculations to figure out an offer price. You should also figure out what your potential NOI maybe with all these increases and renovations. As well as whether it is worth financially to pursue these renovations, to get the rent increases - in the other words, will it be worth the investment?!

Sounds like it good be a good deal. $55k NOI means at $550k that's a 10% cap rate. You've got to back out repairs and the homes are of no monetary value. In fact you may end up finding that they cost you more to keep maintained and rented. Either replace them or owner finance them out.

Even though it 8 per acre zoning wise, that doesn't take into account roads and other required setbacks, parking, etc..  What are the other parks in the area charging for lot rent?  is this one below market?

With owner financing I'd offer $250k as you're going to need some funding to do repairs and upgrade the apartments.  That's a small number to manage so you probably wouldn't need a full-time manager - are you self-managing?

Interesting little deal. Curious to see how it plays out.

@Alina Trigub thanks for the reply. These are questions I need to think through, I appreciate the feedback. I know there is a demand for housing here at the rate it is now and I think the market could stand raising the rent somewhat. I think perhaps if I did some minimal repairs and cosmetic fixing up, and raised the rent $100 —$200 that could be doable. Probably would not be a good idea here to do a major overhaul and up the rent a whole lot. Lots to consider. 

Originally posted by @Richard Sherman :

@Margaret Bass  How many pads?  When you said owned, you mean Park owned homes or tenant owned homes?  What is the general market (state ) it is in?

 Thx for the reply. There are 10 MHs, park owned, and room for about 5 more as it sits now. Zoned for 8 per acre 4.5 acres. Small 6 unit apt and run down stick built cabin also on the land rented out. North Florida rural area. All old and run down. Needs turn around but may be worth it for the right price and with the right strategy. Thoughts?

How's the local economy? Old mobile homes (depending on condition) may actually be a liability by being on the property. It sounds like the current property owners aren't renting any lots at all? Is there a market for that? ie, do you think if you cleaned up one of the pad areas that you could get someone to place a newer home with them paying a monthly lot rent?
From the limited info, I'm thinking that perhaps the multi unit could be improved and the price increased but the trailers may not have much upside.
One other thing, are the pads large enough for doublewides? Longer trailers? or  are these ancient pads made for when mobiles were 50' long? Does the area require water well testing on a quarterly or annual basis? Could you get hooked up to public water? I'm assuming the park pays sewerage, garbage, water expenses. What about cable service if available?

@Belinda Lopez . Thx for the response. The listing is for $350000. I was also thinking $250000 might be fair. Need to look more into all the details and due diligence. I was also thinking of doing a lease to own for the homes and just rent out the lot. I don’t want to put a lot of repair work or time into the mobiles. But I may see how it goes keeping them park owned for a while. Others with similar parks in the area have said their tenants don’t call much for repairs and generally are self sufficient. And someone suggested perhaps I can include that they take care of their own repairs in the lease. I’d have to look into tenant/landlord rules on that. I need to check what other parks are charging. I think this park is probably on the low side and could be raised somewhat. I will be self managing along with my husband. Owner financing would be great. Not sure how they feel about that yet. Thx for the feedback! 

@John Teachout thx for the response. The economy is good here and definitely a good market for this kind of housing I believe. It’s a small town but a good one with growing businesses and infrastructure, but also many people that need low income housing. The park is not currently renting lots but I may be interested to switching to that. I’m not sure you can even really say that they have ‘pads’ per say, it is more like they just put some mobile homes on some land with room in the zoning for 5 more. I think we would probably have to buy any additional mobiles we want to add and then rent them or lease to own. I’m not sure we have a market for someone coming to put their own mobile there. The mobiles currently there may have some life left in them, no value per say but they are currently rented and not completely horrible from the outside. Need to look inside still and look closer to get a full picture of condition. There are also two old buildings, one small and one large that need to be removed from the land. 

I need to check if it can be hooked up to public water, currently it is well and it is tested and treated quarterly. The park pays sewage and garbage. No water and no cable. The owner is reporting $1910 in expenses per month. This includes no repairs or improvements whatsoever. Sewer, garbage, electrical/gas, taxes, insurance. 

Can you explain how the mobiles could be a liability and what I should look for there?

Mobiles can be a liability not from a legal standpoint but from a financial one. If they are "beyond repair" rotted out and just junk, it can cost a significant amount just to have them removed. When scrap prices were higher, someone may have taken one for the scrap value but with low scrap prices, you could expect to have to pay someone to remove it. So in other words, you would be financially better off if it wasn't there in the first place.

Sounds like there's other structures that need to be removed. (because they're not repairable?) If that's the case, be sure to get some quotes for what razing them would cost as the disposal and equipment fees would be several thousand dollars.

Sometimes a local fire department will burn down a building for "practice" but nowadays that may create too big of an environmental impact.

If you could pick up that property with it's present usage, can you envision a "highest and best" different usage for that much acreage in that area? What about building a storage unit facility on the property?

Depending on where in FL this is I'd be interested in buying the contract from you if you decide not to do it yourself.  Either way, I'm open to giving advice if you want to talk privately.  

@John Teachout yes two of the old building are inhabitable and not worth fixing. My plan is to deduct the cost to remove them from the purchase price. I need to consider what the highest and best use would be. Whether that is fixing up, keeping, and expanding the current use, or doing something different. Either way the land, zoning, and location is valuable. Thx for the insight. 

I’d have to see it to truly be able to tell if I’d keep it as is. Most of my decisions would be based on is it grandfathered in or will everything have to be brought up to code. Is the effort worth the reward.