looking at buying first park

[N/A N/A]

Im looking at buying my first mhp. Its small with just 8 units total. There are 2 being homes being rented right now with 3 other trailers that are TRASH and the other 3 lots being vacant. So its going to take some new homes and not sure what the best way would be to fill the park up. Id rather just rent out the land, but was wondering if that is hard to do with trying to fill the park up? They also are wanting $100,000 for it with really only 2 rents coming in. That sound steep to yall? Its in pa...

[Joe Hartman]

@Adam - Ya, Sabrina got it right. Her math just eliminates 1 step in the quick and dirty assessment by multiplying X's 60. She's already plugged in my cap rate of 10% to go along with my assumption of operating expenses being around 40% of lot rent income.

But doing it Sabrina's way might not work everywhere. If you use that shorthand math and assume a cap rate of 10% in Orlando, Fl, you're not going to find many deals at all that fit your criteria. If you want to buy a small park in the middle of nowhere Michigan, you might be overpaying.

So first you have to figure out what cap rate you expect in order for you to even consider investing. If you're at 10, then maybe spend less time in Fl/Ca (trading at lower cap rates than 10% right now) or "retirement" type parks. But if you're not willing to speculate on land plays or other forms of higher risk, that might eliminate areas going for a cap of say 12-15% (maybe a troubled park, troubled area, small park, etc.). So you're investing goals should help narrow down your search.

@ OP - I know how you feel. I'd like to start off with a little park, so if it blows up in my face, it takes less time to rebound. But for almost all parks that I look at with this small amount of lots, the numbers just don't support it. The operating expenses vs. income is usually very tight, and estimated capital expenses seems to make these small parks more risk than I'm willing to take.

It might work on an all city owned water/sewer park, which has no park owned homes, that you manage yourself, if you lived in a place with higher cap rates. I live in Orlando, so that doesn't seem to be happening for me. I'm left with a couple options. 1) Get a small park, even though the risk is higher than I'd like 2) Go back to investing in SFH and/or duplexes try to make some more $ and then revisit buying a park 3) Find partner where we can buy a park with enough lots that it now makes sense to be in the park business. That's the conclusion I've come to for myself at least.

- Joe