Small Mobile Home Park

[Kelly Bernhard]

Hi,

I've invested a couple times for appreciation but now I'm wanting cash flow. This is new for me so any advice would be great. This is a very small mobile home park (4 homes and a building). The purchase price is $159K and the rents from the homes are $1750. The building would rent for $550 but is currently vacant (conservative).  Taxes and insurance should be about $1830 annually and a PM will be about 10% (hopefully less!). The owner will finance for $50K down with the balance at 5% over 10 years.

The park is across the country...I live in the SW and the park is in the SE. If I can do without PM I will but I'm factoring that price into the equation. I don't like purchasing across the country but I need to get out of our expensive state (California). Anybody have a small park far from your home?

What do you guys think?  Thanks so much for any advice!!!

[Jefferson Lilly]

I'm a Californian who manages/invests in the greater midwest.  Distance is not an issue, if you get educated first.   The key issues I see are:

1. You are not yet educated in the ways of mobile home parks.  They are quirky.  Managing from a distance is no issue after you've put in the time to get educated.

2. The SE is a particularly bad place to own any sort of residential property, especially MHPs.  The economy there is perennially weak (unless you are right in Atlanta or Nashville or one of the other large cities).

3. The price is not great.  Small parks trade at a discount (higher cap rate) to larger properties precisely because so few people want to 'mess' with a small park and that financing is difficult to come by.  My gut would tell me that $100k would be more fair value, and perhaps as little as $60k.  (It'll all depend on location and infrastructure).

Good luck,

-Jefferson-