Mobile Home Park Deal Analysis

[Chris H.]

Hello,

I've come across a 3 acre mobile home park for sale, and can use help with the analysis:

Current Asking Price: $145,000 for a piece of land with 35 hookups. There are currently 20 spots filled at $150/month. (20 spots @ $150/month X 12 months = $36,000 income)

Assuming 30% down at this price: $43,500

Mortgage of $101,500 @ 4% for 20 years = $615/month or $7,380/year.

Taxes/Insurance (assuming 0.5% tax) ~$2,000 year.

$36,000 income - $9,380 tax/mortgage/insurance = $26,620.

~61% cash on cash return.

I know this does not include fees for collecting rent/marketing the property, but what am I missing here? This deal seems too good to be true. Can use some advice.

[Jeffrey H.]

It's actually priced about right assuming a 50% expense ratio (and also assuming not in California).  Parks with ~20 homes or less have higher expense ratios around 40% or more, and if there are private utilities then even higher in many cases.

Are there deferred capital improvements requires for the infrastructure, roads, tree trimming, etc?  Bad part of town with limited upside?  Could you increase rents immediately, and if so how much?

The Seller's situation may explain it - usually would not be finding something priced like this on loopnet unless there were some odd circumstances, but if resulting from direct mail or pocket listing then it's very possible there is nothing wrong.

Do you diligence.