Real Estate Agent · Lewisburg, WV · Member since 2019 · 14 posts · 4 votes
I have read some really great Mobile Home Park deal analysis posts. However being new to the space (I have previously only flipped SFH), I would really appreciate opinions with experience on the specific deal detailed below.
Summary:
Asking price: $449,000; Annual Income $47,880 (95% occ.); Annual Expenses $13,282 (approx.); NOI: $34,598; Cap Rate 9.38
Details:
Income:
24 units at 100% occupancy (two units are wrapping up lease options) at $175 lot rent for monthly income of $4,200 or $50,400 annually.
24 water meters are purchased and included. Supposedly the park is on the schedule to get city water to the meters. Currently on wells and professionally managed for largest expense. This would require due diligence as it would greatly improve NOI.
Annual expenses: Taxes $2,741; Water $4,600; Septic $3,000 (5 septic systems); Electric $900; Extra Water Test $500 ($1500 every 3 years); Insurance $541, and I added an extra misc. of $1,000. Total: $13,282
Thank you for considering responding and helping my education (and analysis paralysis).
Real Estate Investor · Ste. Genevieve, MO · Member since 2009 · 363 posts · 944 votes
4y
The expense ratio on a park of this size with private sewer is more like 40% to 50%, with a projected NOI range of around $25,000 to $30,000. At a price of $449,000 that equates to a cap rate of around 5.5% to 6.7% -- no way it's anywhere near 9.38%.
But the bigger problem is those are the cap rates if the property is in PERFECTLY USABLE CONDITION. You are telling me that there are meters to install, city water to install (plus probably road repair and other items) and those must all be deducted from the price as you will have to pay them at some point going forward.
The bottom line is that the asking price looks to me to be nuts and should be more like $300,000 less whatever the costs are to fix those infrastructure items -- so basically less than half of the asking price.
Just trying to keep you out of trouble.
I have not seen the park or the numbers so these guesses are just based on averages. It's possible it's the best deal of all time but not from where I sit.
Real Estate Investor · Ste. Genevieve, MO · Member since 2009 · 363 posts · 944 votes
4y
The expense ratio on a park of this size with private sewer is more like 40% to 50%, with a projected NOI range of around $25,000 to $30,000. At a price of $449,000 that equates to a cap rate of around 5.5% to 6.7% -- no way it's anywhere near 9.38%.
But the bigger problem is those are the cap rates if the property is in PERFECTLY USABLE CONDITION. You are telling me that there are meters to install, city water to install (plus probably road repair and other items) and those must all be deducted from the price as you will have to pay them at some point going forward.
The bottom line is that the asking price looks to me to be nuts and should be more like $300,000 less whatever the costs are to fix those infrastructure items -- so basically less than half of the asking price.
Just trying to keep you out of trouble.
I have not seen the park or the numbers so these guesses are just based on averages. It's possible it's the best deal of all time but not from where I sit.
Real Estate Agent · Lewisburg, WV · Member since 2019 · 14 posts · 4 votes
4y
Thank you for taking the time to reply to keep me out of trouble!
I believe you are correct, this is not a deal at this price. Your advice and resources will certainly help me going forward to better understand the analysis of a MHP.
Summerville, SC · Member since 2018 · 553 posts · 252 votes
4y
I agree with Frank Wolfe to an extent. Expenses on private sewer should not be taken lightly. This would be offset if your income were higher. If this deal were in a different region, where LRs were maybe 225-250/mo, it would be a deal. (24 pads in my region, under $500k is really good)
Real Estate Agent · Lewisburg, WV · Member since 2019 · 14 posts · 4 votes
4y
Thank you! I appreciate knowing where the numbers are off and quick rules of thumb to quickly determine if I should spend more time analyzing. I do not believe the park previously detailed is below market rents. At first glance, it seemed like a deal worth analyzing with my limited knowledge.
I had just called another FSBO park closer to home and rents were at $125.00. That park has a better location and may have room for a slightly higher lot rent with improvements. I believe this park's value is more in the 50 acres of commercial real estate and I did not follow up with running the numbers. They are asking 2.5 million for 58 spots, 2 commercial buildings, and 2 single-family homes. I guess this is all to say its already been eye-opening to the number of variables just calling around to a nearby parks.
Investor · Charleston, SC · Member since 2015 · 39 posts · 17 votes
4y
I think its a smart move once you locked down the right deal. Warren Buffett bought mobiles homes and holds them. why?? They say more millionaires live in those than anywhere inside the USA. I read a lot the book might been millionaire mind maybe. Obviously not everyone who lives in a mobile home is millionaire, but interesting best investor in the world owns them too....
Specialist · Scottsdale, AZ · Member since 2014 · 626 posts · 700 votes
4y
@Rebecca Thacker the advice from @Frank Rolfe is spot on. If you have gotten yourself familiar with the subject park and like the area, identify all the parks within 20 miles and call them directly to see if they would consider selling. Maybe you will find a better one that way.