Help me analyze this deal (mobile home park)

[Cody Strickland]

Hey BP, I'm new to the forums and thought I'd jump right in by asking for advice on a potential deal. It's a 44 pad mobile home park, and although I don't have any experience with MHPs, the numbers seem interesting enough to consider. I have the option to bring in an experience partner if needed. Any insight would be greatly appreciated! 

Here's the scoop:

- 40 of the 44 pads are filled

- Park owner owns 27 of the mobile homes (no vacancies)

- Most of the homes range from 1990s to early 2000s

- Park road needs to be paved, some of the homes (maybe 3 or 4) need to be replaced. 

- City water, but not sewage. Sewage treatment facility on property

- Owner is currently handling all repairs and management so expenses are pretty low (about 20k/year)

The numbers:

- Seller's bottom dollar = $800k

- Gross rent = 210k, expenses = 20k, so cash flow = 190k

- Each home rents between $500-700/month. 

- Each pad rents for $175 per month (could bring this to $225 or so after upgrades)

- Assets and property appraised at $350k

Our long term goal would be to upgrade the park (maybe 100k over 2 year span) and work on rent-to-own deals with the current tenants so that we only own the lots at $225-250 each. 

[Ryan Groene]

quick evaluation...40*175*12*.6/10=$504,000...this is number of occupied lots*current lot rent*12(to annualize)*60% or .6(40% operating expense because park pays water and sewer and higher because private sewer) divide all that by 10(which assumes a 10% cap rate)= purchase price.  Then you can add in the value of all the park owned homes, which is 27*$5k to $10k=$135,000 to $270,000.  total purchase price could in the range of 635k to 774k.  Not necessarily that far off. 

I would assume a pretty high expense ratio, probably closer to 50% becuase of the high amount of park owned homes.  iF they are willing to finance, it probably wouldn't' be a bad deal.

Just keep in mind that the sewage treatment plant, also know as waste water treatment plant does cost more to run, depending on the state, also if it goes out, it could cost close to 500k to replace depending on the type of plant.