Evaluating MHP Purchase

Mobile Home Park Investing
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Evaluating MHP Purchase

Brian Borchers
OH · Member since 2014 · 4 posts · 0 votes

Ok, one of the purchases that I'm considering seems to be a bit overpriced, but I want to make sure I'm calculating my numbers correctly.

This part has 49 lots with the following breakdown - 31 tenant owned, 15 POH, 3 empty lots.

That looks like the following:

Lot Rent = $235 * 31 * 12 = $87,780 * 70% = $61,194 * 10 = $611,940

POH ($267 ave. extra rent) = $267 * .5 = $133.50 * 12 = $1,602 * 15 = $24,030 * 10 = $240, 300

Total = $611,940 + $240,300 = $852,240

According to the sellers numbers, the NOI average over the past 4 years is ~$91,000.

Tenants pay for trash, electric and gas. Water and sewer are sub-metered, but not charged back. City maintains streets and lights. Water and sewer average about 30% of total expenses.

Rents are slightly below market.

Seller wants $970,000.

I'm sure I have forgotten something, but that should be enough to get everyone started.

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  • Bryan H.
    Investor · Willow Spring, NC · Member since 2013 · 788 posts · 285 votes
    12y
    Negotiate down to $850-$900k, raise rents to market rate, bill back those water bills and you got a money maker. I'd also try to sell off those POH
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  • Brian Borchers
    OP
    OH · Member since 2014 · 4 posts · 0 votes
    12y

    Bryan,

    Per my other thread, what is the best say to sell off the POH? I'm assuming that most of the tenants can't do it without seller financing that is now illegal / too complicated.

    Thanks

    Brian

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  • Shahan L.
    Wholesaler · Orlando, US · Member since 2014 · 6 posts · 4 votes
    12y

    back the extra rent from the POH out of the deal. there's usually high turnover and you tend to have more management problems, and police visits to those units. what about mowing/landscaping. any park-owned utilities say for a sign or anything.

    include repairs. with 49 spaces you may have a problem here and there with a meter base, or blocked sewer. for some parks the owner has to maintain it, sometimes the city.

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  • Bryan H.
    Investor · Willow Spring, NC · Member since 2013 · 788 posts · 285 votes
    12y
    Originally posted by @Brian Borchers:
    Bryan,

    Per my other thread, what is the best say to sell off the POH? I'm assuming that most of the tenants can't do it without seller financing that is now illegal / too complicated.

    Thanks

    Brian

    You can sell them to other cash investors. Turnkey investments

    Or just give them to the tenants with an agreement they can't move for 10 years, raise their lot rent a little. The expenses go away, and your lot rent increases.

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  • Matt B.
    Investor · Vincennes, IN · Member since 2013 · 223 posts · 108 votes
    12y

    I agree. You need to back the POH out of the NOI. Base your numbers on lot rent only. Then come up with a value for the homes separately. Unless they are newer homes, plan on giving them away for nothing or next to nothing.

    Lenders may or may not count the POH income. Also, you need to dial in expenses. Taxes, insurance, payroll/management, utility maintenance, mowing, legal, vacancies.

    I am going to say, not counting the homes, you have a $500k park, especially if it is in the Midwest.

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