Mobile Home - Deal Analysis: High Lot Rent? Good deal?

Question

Hello BP!

Just wanted say I love this forum and I wouldn't be where I am now without it!

I got a lead on a motivated seller for a MFD home in a B- to C+ area. This is going to be a Lonnie Deal.

Specs:
- 1970s 18x56
- 3 bed/2bath
- New heater (2011), New A/C
- has wood flooring in living and kitchen. Carpet in the rest of the house.
- Repairs: needs new carpet and fresh paint.
- Lot rent: $1073
- With utilities bills come out to: $1225 (this is in the middle of the summer)
- Lot rent has been paid until the end of the month. So I can try to sell the home by Aug 31st without paying any lot rent.

Other info:
- Motivated seller, just bought a home and needs to move by the end of the month
- Owner lived in unit for 22 years, bought in 1990
- Park has a pool, a rec room, and playground for kids. Park owner expects you to sign a 5 year lease.
- Market rent for 3 bd/2 ba is $1400-$1800 in the area.

- Buying: He was asking $4000 and I offered $2500 - Selling strategy: owner financing to a buyer, $2000 down, $250/mo mortgage for 72 months.

Questions: 1. Does the lot rent seem high? It's $1073. Will this hurt me in the long run? 2. Is my offer too high? 4. Anything else I should consider before jumping in?

Thank you in advance for all the help.

Sabrina Laplante · Answer

This is another reason why I do not plan on investing in any mh's in my own state of California, because of the very high lot rent. My theory is, why would I buy a mobile here with high lot rents, when I could buy a ton of them in other states where the lot rent is around $250 or so. Also, had you previously put up any test ads to see if you could have sold it easily or not? Hope you find anohter deal soon, but with much lower lot rents! Good luck my friend!
Sabrina Laplante

Chris G. · Answer

You can make good money off that deal if you already have a buyer lined up. Otherwise I would stay away from it if the park owner will not give you a major rent discount or give you free rent until it sells and during any time the unit may go vacant and you are trying to sell it again.

Dale Osborn · Answer

Is the MHP a family or senior park? This will make a big difference as a senior MHP will limit your market to only 25% of the available pool of buyers. If it is a family park, it would make it an easier deal to put together.

Charles Morgan · Answer

I would buy it if I could move it to property I own. Do you happen to have an empty plot you could put it on? I dislike lot rents and HOA fees.

Uwe S. · Answer

Swat,
an reasonable lot rent is not more than $400 for me but you in CA so lot rent much more then other parts in the US.
A park owner set his rents if someone will pay for it, so these parks have very good income.

Jump into these deal only if you have promptly an buyer all other makes no sense I guess.

-Uwe

Scott Pirrie · Answer

I did the same thing on a park here in the Seattle area, the home was newer but, a 2 bed 1 bath. Nice park in a good area, 710/mon lot rent.

Biggest mistake made in RE investing we ended up giving the home back to the park after a year of not being able to sell mainly due to high lot rent. 2 beds did play a part but, another investor we know who got the lead on this deal had a 3/2 in the same park and lost about 15-20k on it.

So don't do it the lot rent will kill any potential profit you have! If you want to make money buy the park and collect 1k a month! Now that's some serious cashflow!!

Swat Khan · Answer

Hello Swat, I shortened your question for my reply.

I will answer your 3. question first. "Don't jump in here!"

Why?

Lot rent $1,073 per month thats not high thats fatal.
If he asking $4k or nothing if you cannot sell this house in 3 months you must pay $3k in propertie rent. How much will be your sales price then? $12k?
Stay away from this if the seller don't find anyone for OO with $4k you will not find anyone with $12k.

My 2cents. Good luck!

-Uwe

Thank you Uwe for your response. I appreciate your insight.

What would be considered a reasonable lot rent for the numbers listed in this deal?

Why would a park owner set the lot rents so high?

Yesterday, I saw a nice park that was 1 mi from the beach and charges $1000 for lot rent which is much more justified since you're near the ocean.

Uwe S. · Answer

Hello Swat, I shortened your question for my reply.

I will answer your 3. question first. "Don't jump in here!"

Why?

Lot rent $1,073 per month thats not high thats fatal.
If he asking $4k or nothing if you cannot sell this house in 3 months you must pay $3k in propertie rent. How much will be your sales price then? $12k?
Stay away from this if the seller don't find anyone for OO with $4k you will not find anyone with $12k.

My 2cents. Good luck!

-Uwe

Mobile Home - Deal Analysis: High Lot Rent? Good deal?

Mobile Home - Deal Analysis: High Lot Rent? Good deal?

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