Mobile home park Deal or no Deal?

[Daniel Brown]

Good morning BiggerPockets! I find myself needing some direction. Ive focused on Self Storage and MFH over the last year or so. So to my surprise, when one of my letters was responded too for the sale of a MHP instead of Storage. I thought I’d entertain the idea because who doesn’t like a deal in any space of real estate right? So speaking with the seller here’s what we have.

46 pads

22 homes 

13 rented 

Lot rent is 200 a month 

The park is city sewer and water.

Tenants that are currently renting do pay their own utilities. 

The park was built in 1976.

The price she wants to sell at is 385k. She will not budge off the price. Demographics in the area are solid. Population growth is stable. Median income is around 52k a year.  More than one employer in the area. 

This park is very mom and pop run. She currently does all the financials on a note pad. No P&L or rent roll. No advertising. Park itself is in pretty good shape and right now the street from a couple schools. 

My questions for all you savvy MHP investors is this:

1. Is this a potential deal?

2. How would I fill up those empty spaces?

3. Can this be ran remotely? 

Thank you in advance!!

[Frank Rolfe]

13 occupied lots x $200 x 12 x .5 = $15,600 which will obviously not even remotely cover the mortgage. However, if you were to fill it to 46 x $200 x 12 x .6 = $66,240 and could sell it at an 8.5% cap rate at that point = $779,294. So you can't say that the deal does not have potential, but you have to address the realities:

1) The seller will HAVE to carry the financing -- no bank will touch this.

2) The seller will have to structure the note to match the park's cash flow, which means low rate interest only in the early years, and probably zero down since you need the capital to make repairs.

3) To make sense of this deal, you'll need to do market comps and the lot rent in the market needs to be around $300 to give it the extra value boost you need to make it compelling.

In these type of "heavy lift" turn-around deals the seller is going to have to be an active participant in the way it is structured. If they think this is going to be an all-cash, bank financed deal, they're crazy.