I am looking at a potential mobile home park purchase and would love some input on the deal. It has 17 lots sitting on about 2 acres. Lot rent is $200-$300/month, currently 9 are filled. The sale would come with 5-8 vacant 60’s 70’s mobile homes. The asking price is $150,000.
I'm thinking we could provide proper management for the park and possibly renovate the existing vacant homes , it is a fairly decent area. There's also the possibility to add a few units. Currently on a septic.Owner is saying expenses are about $7000 per year +/-. Not sure about owner financing yet, but I think we could make something work. It's definitely not pretty, mostly older single wides and stuff everywhere! I would definitely be adding a boatload of value bringing this park back to glory.
Before you plan on adding new units, talk to the municipality. They might not let you, or they might have very specific requirements that make it difficult. Worth making a phone call about.
Hi Andrew, I have a bunch of experience assessing MHPs. I'm in Asheville, if you want to reach out, i can give you a bunch of pointers that may help. PM me if you're interested and I can try to assist. Good luck, RM
This sounds like a good deal. The things I would be weary about are the expenses (try to get a break down or better T-12 financials), the amount of money you plan to put into the deal, getting off the septic system and onto all public utilities (seperately metered) and of course try to infill resident while you add the those new lots (which you hopefully approved with the city prior to purchase).
@Andrew Roberts First of all, those expenses are WAY too low. But before you dig in and roll your sleeves up, here's a quick way to evaluate this deal on the back of a napkin to find out what it will be worth when you are done and see if it's even worth your time.
Let's assume you will be able to get all the lots filled at $300 per month. $300 x 17 x 12 months gives you gross revenue of $61,200. Expenses will run between 35-50% but just for this example, let's run them at 42% to be in the middle. That gives you NOI of about $35,500. Assuming a market cap rate of 8% the park will have a finished value of $440k. (you will have to adjust the cap rate for the market)
Now, let's make some more quick assumption to see what it will cost to get there. 150k capital improvement budget if you budget 10-15k each to renovate the 8 vacant POHs, and an additional $50k to address the infrastructure, roads, pedestals, landscaping, signage, etc.
Based on those quick assumptions, you would have $300k into the park, it would be producing annual cash flow of $35,500, and you could sell it for a profit of $140k minus closing costs.
If that fits your yield requirements and you are willing to put in the sweat to do that work, then it is probably worth your time to pursue the park further. I would always start with a demand study to make sure you will be able to sell the homes and raise all the rent to $300. I have broken down how to do a demand study in several places here on BP threads, in case you are not familiar.
All the best to you!
Update!! I did not move forward on the deal 150k purchase price of which 50k was a assignment fee the current owner is trying to sell it solely based on future value. I will let this deal simmer for a few months and revisit it later if available.
Thanks for all the help and insight the pursuit continues!!!!!