Nearly empty mobile home park. Suggestions and advise?

Question

Let me start by saying I have not visited the property yet, I'll be doing that in the next week or so.

Here are the property details.

LOCATION

Midwestern city of 140,000, within a mile of a military base and university (17,000 enrolled).

INCOME

2 stick built homes - currently rented ( total monthly rent $1,170)

2 tenant owned mobile homes @ lot rent $275 each ( monthly $550)

3 park owned homes, vacant and haven't been rented for 2 years.  Broker says need work, I'll assume the worst - that they need completely rebuilt or replaced.  These were being rented for $500~550 each.

14 empty pads.  From google maps pictures (2015) there were 5 additional homes that have been moved or torn down.

EXPENSES

Stick built homes pay for all utilities.

Park owner pays for water/sewer of mobile homes.

Property taxes $2,000 yearly (166.67/mo.)

Water/sewer, Trash, landscape, snow removal, etc monthly average $350

There are additional misc expenses roughly $40/mo.

Asking price $65k (15 yr mortgage about $400/mo.)

Insurance unsure yet.

As it sits now I think it cash flows $250ish/mo after considering vacancy and capex.  Not good.

However pending the condition of park owned mobile homes and existing pads/utilities I think this has a lot of upside due to location and a growing city.  I have personal finances in place to upgrade the park owned homes or replace them and would plan on adding a few new homes in the next year.

Sorry for the long post.  Would really like to hear your thoughts and opinions.  What am I missing or should I be wary of.

Thanks.

Nik Moushon · Answer

I grew up in the midwest and now live in WA state. It costs about $150/sf here to build new on the conservative side. I would be surprised if the midwest is up to $150/sf unless you are near some select large cities. The current house prices there just dont justify building at $150/sf. Your duplex price seems more like what I would expect but your 4-plex price seems way high to me. Jumping from a duplex to a 4-plex does not add $50/sf. There really is not that much cost increase with that little of a jump in number of units.

To the OP - if zoning doesnt allow it to be improved as a MHP then just take it out of the equation as a whole. You could keep the existing ones if they are not THAT bad, as a way to help keep cash coming in, but plan on taking them out in the end and just develop it all as duplex or 4-plex. As much as MHP makes since, dollar wise, cities dont like them any more and are pushing them out. You can't fight it so dont bother, especially on something this small. Thats what I would do anyways.

Autumn Rankin · Answer

Hey!! So on one of the podcasts by Jefferson Lilly he says to downloan google Earth and scroll back through the years looking at the park you want to buy and you can see if it has ever been filled.

I think thats a great price!!! if its a growing city. Park street Park investors has podcasts and 1-19 is all about starting out on mobilehome parks.

Art Bridgeman · Answer

@Donald S. Hello Donald, thank you for all the great information. I am doing a full duplex to single family home conversion in Tower Grove South, the bricks are really what is driving up the cost and the need for a mason to basically rebuild the back wall. It was in rougher shape than I anticipated.

Art Bridgeman · Answer

@Donald S., those are great numbers for a new build, no one I have talked to in the last few months can come even close to that for a four family in St. Louis city for a 3x2, which contractor are you using, I would like to work with them on a build in south city. My current full gut rehab is running around $85 per sqft on a 105 year old home. I can go with stick built and brick facia. Trying to keep the homes fitting in with St. Louis architecture.

Art Bridgeman · Answer

@Nik Moushon and @Donald S., My original quote for this thread was up to $600k, that was my highest bid when I was trying to have a 4 family built in the style of All Brick with each unit running 1000 sqft [became to small for a 3x2 for what I wanted], for 4000sqft total size on a full basement used for garage space and storage. I will keep looking for better prices, thanks for the info. My lowest bid was $140 sqft, still much higher than Don’s numbers. Lumber, labor, cement, brick, and even the fixtures are all more expensive from a year ago.

Nik Moushon · Answer

Being near St. Louis and using brick will be what brought that up to $150/sf. Still a bit surprised that its that high. Didnt think the prices had reached that high in the Midwest yet.

Art Bridgeman · Answer

@Nik Moushon Hello Nik, the $150 sqft for the 4 family was a quote from a builder in St. Louis City to build a 3x2 4 family in brick to replicate the existing inventory. The Midwest is big , so prices will vary greatly.

Nearly empty mobile home park. Suggestions and advise?

Most Popular Reply