Mobile home park investing.
Hendersonville, NC · Member since 2016 · 4 posts · 0 votes
Hey guys,
I was curious about investing in a mobile home park in NC/SC area. I am new to real-estate investing and I'm looking at MHP's to start investing in. I work full time so I'm looking for something that I can jump into with lower maintenance issues and not having to worry too much about toilet calls in the middle of the night, or leaking roofs. If I understand correctly, any park owned homes will by my responsibility to manage and maintenance. It seems that MHP are a good fit for my job and my personally available hours. I am also interested in where to find financing for mobile home parks. If you all have any suggestions or advice, I would be very grateful to hear them. Thank you for your time.
@ Jason Pavloff
9 pads at $150 mo is $16,200 in annual revenue.
The NOI the seller is stating is likely including the rent from the park owned homes.
As an owner of multiple parks and having been in the industry for years I can tell you park owned homes are a NEGATIVE. Investors such as myself and lenders heavily discount if not wholly IGNORE the revenue from the park owned homes.
The "reason" for investing in a park is to rent out the dirt. Owners that rent out homes to tenants are turning the park into an unattractive apartment complex that carries all the expenses of the same. The anthesis of what owning a park is about.
I would heavily discount the value of the home and the revenue they generate as not being legally attached to the spaces they are rapidly depreciating assets.
I found a deal on a small 7 space MHP in seemingly great condition but mostly vacant and curious to get someone with experience take on the situation.
I found this park by responding to a post for a mobile home park vacancy on a local Facebook buy, sale, trade site. I messaged the person listing the vacancy and asked if they have considered selling the park. To my surprise the owner of 30 years said yes he is retiring and would like to sell but he hasn't attempted to yet. I stopped by the park and snooped around a bit. It appears to be in excellent shape. Full concrete pads for the mobile homes, also wired for the possibility of RVs, manicured corner lot in a residential neighborhood with several new construction brick homes for sale.
My concern was that this park is completely vacant with the exception of two Park owned mobile homes that he is receiving $550 per month rent. In his listing he was asking for $350 per month space rental which seems to be in line with most of the area. When asked why so many vacancies he replied that he just hasn't tried very hard to fill them and has lost interest. He said it has been a trouble-free park for the entire time he has owned it and looking at the infrastructure I do believe it to be true. I also believe that I can get it filled with no problem just by comparing the location and condition to others in the area.
The owner said he will take $150,000 for this 7 lot Park and he is not open to negotiation. He also said he is not open to owner financing. Without verifying and just going by his word he said taxes run around $2,000 a year.
So.... hopefully someone with experience can help me determine if this is the great deal that I perceive it to be and also would this be worth doing as a no-money-down deal as I can quite possibly get the down payment funded through a private lender. My concern is what the bank will require since there is so much vacancy.
Any info, suggestions, advice is appreciated.
Thank you in advance.
@David Mathews at first glance, it looks like he came up with his price using a fully occupied NOI ( $350 lot rent*7 pads* 50% expense ratio*12 months/ 10 Cap= $147,000). What he really has is a 70% vacant park and two mobile homes.
When you say you'll get it filed with no problem I disagree. You'll need to aggressively market your area to find a dealer or individual/investor to move a house to your park, which takes you time. In that case you'll most likely have to pay the transportation/set up costs to entice them, which will run you at least $20k. Or you'll have to buy homes, move them in and fix them up, which is around $60k. That last scenario then puts you in the rental business until you can sell them on rent credit for 2-4 years.
I don't think any bank will lend on a 70% vacant park no matter how good the condition and the loan amount doesn't move their needle. So you'll need all cash on this one or a Line of Credit.
If you think its a good deal with lots of potential and want to pursue it I'd have him give you bank statements for the last three years. Dig into those to get an accurate picture of the fixed costs of the park so you can model your fully occupied NOI. Then I'd use a higher cap rate (13-15) to account for the work you'll have to do getting the park on its feet.
Best case, you get the park for $100k and put $20k into it to get homes in over the course of three years and another $10k for misc expenses. You get the expense ratio down to 30% and raise the lot rent to $375. That's $22,500 NOI in year three. You have to season it for a year before the banks will talk so you wait until year 5 and get a 70% LTV on the park worth $225,000, which nets you $157,500. That's a 15% IRR.
A pretty good return, but it relies on a lot of "ifs" If you can fill the park with homes in three year. If you can get a loan. If you can sell the POH, if you don't have to buy home to infill, if you can raise the lot rent. Seller financing is a game changer in this deal though.
Edit: I wrote all of this before I saw you had started your own thread... my bad.
Bill F.
Thank you very much! I did start my own thread about this but nonetheless, your response is exactly what I needed and seems to be the common sentiment. It also gives me the insight that I need to evaluate future deals. I believe that I am going to hold off on the mobile home park idea for a little while and build up capital for that "special deal" when I do come across it.