Looking for advice on this property!

[Jack Justice]

There is a 14 unit mobile home park with 2 single family homes for sale a short distance from my house. Less than one mile to be exact. It has been for sale for some time and I just recently called and got the figures on it and would like opinions on it!

14 mobile home...$435-$500

2 Houses....$750/each

8 acres highway frontage only 1 mile from a major interstate exit and 2 miles from major town.

Asking price is $400,000.

All homes have individual septic tanks except for one house and two trailers, they are on one larger septic tank.

This is something very new to me and would love to hear from anyone with experience in this sort of investment.

[Jefferson Lilly]

Jack -

You need to spend 30 - 50 hours getting educated about the quirky niche of mobile home parks.  The materials and 3-day long Bootcamp at mobilehomeuniversity.com will be your fastest and best-quality path to getting educated.

But briefly, a small park like this will trade for 60 - 70 times the monthly lot rent at best.  I do not see anything in your description that discusses the lot rent.  It sounds like the mobile homes are all owned by the park and rent for $435 - $500.  Look at competing parks, and determine what is a reasonable lot rent.  Multiply by 60 if the park pays water + sewer, and by 70 if not.  The reason for the lower 60x multiplier is that the cash flows are worth less if you are paying the utilities.  If not, then each pad is worth 70x the monthly lot rent.  (And who pays water?  Is this property on a well, or is it on city water?)

Then value the mobile homes for what they can be sold for on a note in the park with $1,000 down.  Run some test ads on Craigslist to gauge market interest.  You want to get out of the business of owning (and, hence, maintaining) the mobile homes.  Given the low rental amounts quoted above, I suspect the mobile homes date mostly from the 1980s, in which case they might be worth $5,000 - $7,500 each, tops.

Then add the value of the single family houses (ask a broker for comps; find out if they can be parceled-off and sold after you acquire the property).  

Adding up the value of the 

1) real estate, 

2) wheel estate, and 

3) SFHs 

... will give you the total fair market value for this property.  Small properties like this trade at a discount.  There will not be many buyers for such a sub-scale business.  You, by virtue of being so close, are the ideal buyer, and there will not be many 'yous' out there for this property.

FYI, I tend to stay away from septic entirely.  You could go bankrupt in a month if the system fails and you do not have deep pockets (or a willing bank) to help you upgrade.  This is yet another reason a small property like this will trade at a discount to a larger property on city water + sewer.

If everything checks out well during your due diligence (e.g. this MHP *is* on city water, and the septic checks out 100% by an expert septic inspection company [don't use just a regular plumber]), then my gut tells me this property is worth closer to $275,000 than $400,000.  Make an offer that works for you, not for the seller.  It's already been on the market a while.  Write up an offer (with contingencies for you to get out if the due diligence or bank financing does not come through) and deliver it to the seller.  Lock up the property while you conduct your diligence and really see what this is all about.

My 2 cents worth,

-Jefferson-