Been a while! Wheres my trailer park people.

9 Replies

I found a trailer park......18 spaces ......14 filled.. 2 houses on the property (not habitable) ...All the trailers are owned by the tenants. The spaces are renting for 200 a piece. Its on city water and sewer. I have to go look at the houses end of the week to see if they are rehab worthy. So thats where im at. 2800 gross per month on whats rented right now.  Whats a good expenses percent average? 

Asking price 224000.. which would mean 15% cap rate on just "the parking lot" if the houses are no good. AM I doing the math right?

Originally posted by @Kalyb Coats :

Asking price 224000.. which would mean 15% cap rate on just "the parking lot" if the houses are no good. AM I doing the math right?

You are planning to put 100 percent down without carrying a loan?

No I'm sure there will be a loan. Probably private and owner carry the guy was semi open to owner carry. I'll know more Friday when I meet with the guy. May 

Cap rate is calculated using net income, that is income after expenses, not gross. So you're looking at like a rough 10 cap with a reasonable expense ratio. Generally something like 30% if the tenants are paying water and 40% if you are. Based on the numbers and city services seems like it's worth a deeper dive. Is it in Casper?                                                                

No its not in casper. I doubt there would ever be anything in casper around that price.. it's ridiculous here lol. I thought grand junction colorado was bad until I came to casper.  So cap is income after expenses, got ya. 

@Kalyb Coats so what came of this? Expenses include roadway maintenance assuming the roadways are private. Is it paved or gravel? Is it master metered or individually metered? Who owns the water and sewer infrastructure? Leaking water pipes are expensive to replace and tear up your paving. Water is expensive if it's master metered. Since sewer is also city, finding water and sewer for $20 per month (10% of gross rents) is great. It also means a $280 per month water and sewer bill. You should drill down on the costs. Who mows the lawns? What about common areas? What about snow plowing, who does that? Is there room to raise the lot rent? $200 is cheap for some areas and expensive if you are way out in the sticks. What about competition? Can someone just buy and empty lot in town and make it a trailer park or is the area zoned for them? Do the City fathers hate the place and want to run them out of town or are they ambivalent? What is the history of the park? Are the current tenants out of towners that will move on when the economy dips or are they rooted in the community.

Get a peak at the sellers schedule E of their tax return. See what expenses he reports to the IRS. On any investment you must at some point look at the specific numbers. This one is close enough to begin that discussion. 

Ive been busy and still trying to work a deal on this Property.. Thanks everyone for the awesome advise. Ive got the expense reports and taxes. Its looking like a solid 22k to 24 k gross for the past 3 or 4 years .....But 7k to 14k profits is what they are claiming to the goverment....which is at most 140k on an offer correct? @ 10% cap rate.. 

Kalyb,

Here is a basic evaluation so you can get a feel for how it's done.  However, you need to negotiate off of the seller's numbers and use this as a snap shot of the potential of the park. My evaluation is just an example.  I don't know enough about the deal to give you one that is accurate to your deal.

Revenues-Expenses=NOI/CAP rate = Purchase Price

Gross Lot rent: 14*$220*12=$33,600
- Vacancy Loss/Bad Debt (2.5%) =$840
Total Revenue = $32,760

Expenses
- Water/Sewer ($50per resident/per month) = $8,400
- Trash ($14per resident/per month) = $2,352
- R&M (7.5% of gross) = $2,520
- Insurance ($80 per lot/per year) = $1,120
- On-Site Management (Free Rent) = $2,400
- RE Taxes (total guess) = $1,500
- Lawn care/snow removal = $800
- Legal & Accounting (1.5% of gross)= $504
- General Admin (0.5% of gross) = $168
- Advertising (1% of gross) = $336
- Replacement Reserves = $700
Total Expenses = $20,800

NOI = $11,960

If the park is billed at the master meter and then sub meters, your NOI will change significantly. Assuming a 10% loss on the water collections due to leaks and uncollectable accounts, your NOI will be $21,020

So, if the park pays for water, then your value will be $11,960/10%=$119,600

If the park bills the water, then it is $19,520/10%=$195,200

Again, this is just an example, but a lot of these expenses should line up with what the seller is giving you right now.  One thing you really need to look at is the upside.  What are the market rents near this park?

thanks Charlie that helped tremendously. 

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