Is this a good opportunity or no?
I am looking at a mobile home park that has (5) mobile homes on it.
Current cash flow is $557/MO - Cap Rate 6.9% and COC 18%.
Does this sound like a great opportunity? Looking for some feedback and thoughts. Thank you in advance.
#2 Mobile Home Park Investing Contributor
- San Antonio, TX
@Dominic Richardson You probably need more information about the park in terms of any deferred maintenance and current upkeep yearly amount.
Also, the age of the mobile homes can limit your cash flow in the future. Just something to think about.
Hope that helps!
Rachel - Thanks for the reply its very helpful. With those set aside, do you think the monthly cash flow, cap rate and coc numbers are good enough to make an offer on the property?
Quote from @Rachel H.:
@Dominic Richardson You probably need more information about the park in terms of any deferred maintenance and current upkeep yearly amount.
Also, the age of the mobile homes can limit your cash flow in the future. Just something to think about.
Hope that helps!
#1 Mobile Home Park Investing Contributor
- Investor
- Provo, UT
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#1 Mobile Home Park Investing Contributor
- Investor
- Provo, UT
Quote from @Dominic Richardson:
I am looking at a mobile home park that has (5) mobile homes on it.
Current cash flow is $557/MO - Cap Rate 6.9% and COC 18%.
Does this sound like a great opportunity? Looking for some feedback and thoughts. Thank you in advance.
I am worried that it is too small of a park to be worth it for you. What are the terms of the purchase?
#3 1031 Exchanges Contributor
- Investor
- Las Vegas, NV
Does it have city water/sewer? This size park I wouldn’t want to have either of those capex expenses looming. Then I’d sell the homes and switch to just land rent.
Quote from @Logan M.:
Quote from @Dominic Richardson:
I am looking at a mobile home park that has (5) mobile homes on it.
Current cash flow is $557/MO - Cap Rate 6.9% and COC 18%.
Does this sound like a great opportunity? Looking for some feedback and thoughts. Thank you in advance.
I am worried that it is too small of a park to be worth it for you. What are the terms of the purchase?
Seller Financing
$275,000
5 year ballon, 30 amortization
3% interest
12% down
Quote from @Bill Brandt:
Does it have city water/sewer? This size park I wouldn’t want to have either of those capex expenses looming. Then I’d sell the homes and switch to just land rent.
I believe so.
I didn't think about selling the homes and reningt out the land. What are the hurdles to making this switch, if any?
#3 1031 Exchanges Contributor
- Investor
- Las Vegas, NV
The upside is you have zero matenance. Nobody moves them anyway. How much land is it and what’s the land worth by itself?
Quote from @Bill Brandt:
The upside is you have zero matenance. Nobody moves them anyway. How much land is it and what’s the land worth by itself?
0.16 acres and I would say $180,000 or less based on the comps.
#3 1031 Exchanges Contributor
- Investor
- Las Vegas, NV
Not excited. By your numbers you are paying $95k for 5 used Mobile homes. I’d like that number to be closer to $25k. So I’d be $70k less MAX.
Quote from @Bill Brandt:$25k for 5 mobile homes or $5k per home. Is that what you’re saying?
Not excited. By your numbers you are paying $95k for 5 used Mobile homes. I’d like that number to be closer to $25k. So I’d be $70k less MAX.
#3 1031 Exchanges Contributor
- Investor
- Las Vegas, NV
Yup. Ask a local trailer seller but I bet they’d say you’d be lucky to sell them for $10k retail. (Assuming they aren’t very new deluxe trailers, just run of the mill ones.) If your seller thinks he can get more than $5k each offer him $100k less instead of $75k less, after he sells the homes to the renters. Then they get their price and you are golden. But I bet they won’t take that deal. They should have already sold them if they were worth anything. My understanding is many homes cost more to move than they are worth.
Quote from @Bill Brandt:Gotcha, thanks for the information and your time. It’s much appreciated!
Yup. Ask a local trailer seller but I bet they’d say you’d be lucky to sell them for $10k retail. (Assuming they aren’t very new deluxe trailers, just run of the mill ones.) If your seller thinks he can get more than $5k each offer him $100k less instead of $75k less, after he sells the homes to the renters. Then they get their price and you are golden. But I bet they won’t take that deal. They should have already sold them if they were worth anything. My understanding is many homes cost more to move than they are worth.
Used mobile homes here in WA state sell well and for considerably more than 5K, even if they need to be moved. I just sold a 1981 double wide that the tenant had totally trashed to the 3rd person that looked at it for 10K, and I think I could have gotten 15K. We required it to be moved off the lot at buyers expense. Now if they are sold to be left in place, they are they are worth at least twice that. And this was for one that needed totally remodeled inside. It all depends on the market where you are, so just do a search online at what is for sale. A dealer will offer you considerably less, one offered me $2500, so I figured if he was going to resell it I might as well just market it myself and it wasn't difficult to sell. It all depends on the age and quality of the mobile homes you are considering, and your local market. Moving expenses can be anywhere from $7K to 20K here, quite expensive. They can be nicely remodeled but not worth it unless you want to leave them where they are.