Mobile Home Park - Owner Costs and Suprises

7 Replies

I am currently eyeballing a couple of smaller Mobile Home (not Rv - though i like those as well).   Not having been involved with a park, anybody have some good ins and outs on what to look for?  What issues can creep up?  Where the surprise gotcha's will be?   

Analysis looks good from my end....not as rosy as it does from theirs...Love it when they show  increased profits and 0 increase in costs over time.  

Rents are 350 and seem reasonable for the area.  No units owned by park.  Dont want to go there. 

The management fee listed (i know...do my own diligence), seemed low at 1500.00 annually so i bumped that up to 3k.  

Units connected to Public sewer so no real worries there although i wouldnt mind TV'ing the sewer for condition.  

From the standpoint of low capital expenditures, low turnover on rents, etc, MHP seem like a great place to park some money.

Thanks in advance for any advice. 

Patrick

Yea there is a lot that could go wrong from the standpoint of a smaller mobile home park.  MHP's are not like apartments where you just turn the management over to a property manager and just kinda manage them and the numbers work. MHP's require a little more management in terms of the property manager, whom normally lives on site for smaller parks and is either retired or has another jobs.

They normally are compensated free lot rent, and $10-15$ an occupied lot

Water/sewer will be your biggest line item.  If its direct billed to tenants then congrats you have found the golden nuggets of parks, otherwise youll have to submeter or do some kind of RUBS system to collect for water/sewer.  

Ask for utiliity bills for last 3 years to see if there is any leaks, looks for sharp increases, etc.

MHP's are a great place to park money for sure as your going to normally get 15-20% return on your cash invested when done correctly.

Smaller parks(25 spaces andbelow) are going to operate a little higher expense ratio than traditional becuase you don't have more to spread out the fixed and variable cost per unit.

reach out if you have questions

Bill - Smaller 15 unit, all leased at 350 a spot, I would guess Class C (Low C), $325,000.  Utilities sub-metered.  All single wides. Taxes and expenses 10,000 excluding management add 5700.00 cost on management).  47,000 net.  Not sure on land size/lot yet.     

That's a real quick analysis.  

Thoughts???? 

Originally posted by @Patrick Hall :

Bill - Smaller 15 unit, all leased at 350 a spot, I would guess Class C (Low C), $325,000.  Utilities sub-metered.  All single wides. Taxes and expenses 10,000 excluding management add 5700.00 cost on management).  47,000 net.  Not sure on land size/lot yet.     

That's a real quick analysis.  

Thoughts???? 

 Expenses are low at 25%. Like @Ryan Groene said, small parks usually run a lot higher than larger parks since fix costs aren't spread over as many lots. 

For rough Pro Forma DD, I'd pencil in 35-40% and go from there. $5k doesn't get you very far in terms of onsite manager, so you'll be ding a lot of work yourself. 

After CapEx and Working capital, you'll clear around $10k/yr on the property, if everything works out and there isn't tons of deferred maintenance.

So Clarification - Management.....Bill, you show that my 5700 management allowance does not get much but Ryan, you say free rent and 15.00 a space.  Should I be figuring 10%, 20%, a free lot and cash?  Please help?  I am sure (not sure of anything - just guessing!!!)  the free lot and cash work on a small park but not the mid to larger parks.   

Secondly, what are the challenges with financing?  I was going cash on the one but at a 10k return, that is silly bad.  

Again, thanks for all the words of wisdom...time is money and I appreciate your time.

Patrick. 

@Patrick Hall We don't have nearly enough info to make a valuation determination. Even then, I could give you one price and someone could look at the same data and give you something 15% higher or lower. The park could be worth $x, but the highest and best use could be $3x. It all depends on a host a variables. 

Rough range $360k-250K. As usual with MHPs, a $0 valuation is always floating out there and a umber of different things can cause that. 

In terms of management, what Ryan said is a rule of thumb. When you get into small parks like this you have to think long and hard about what salary the park can support and what you can reasonably expect the manager to do given their compensation. At $5k/yr or $125/month on top of lot rent I wouldn't expect to get someone with a broad skill set. Now that means you'll have to handle any and all issues outside the norm. Is that something you have time for? How does the increased responsibilities for this asset impact you achieving your investment goals?

For financing, that's all on you... call around to local banks and see if anyone makes loans on MHPs. You could also check out who had the note on it before. Paying cash is also an option along with a seller carry. 

Running these parks properly doesn't leave you with lots of cash flow, at least for the first few years. Unless you can force appreciation, these kind of become a core asset that is a time suck.

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