Possible MHP Turnaround ??

[Bryan H.]

An 80 year old widow is looking to sell the park her husband built back in 1969. It has 25 lots of which 9 are occupied. I'm told they are all family and have been there pretty much since the park was built. All homes are owned by tenants, they pay for electric which is metered. Lot rent is $195.

I got her P&L from a PM company that is managing the property for her. A couple things jump out.

High vacancy and Expenses range from 50-75%.
I spoke to the PM company about this. The water lines are failing and need to be replaced. The owner pays for water and she has about 30% of her expenses being spent on water. She patches leaks but the whole thing needs to be replaced. They haven't attempted to move anyone into the park because of the issue with the water. They are getting me a quote to replace the lines and add meters to each lot. The PM estimated $30k and told the seller this cost would come directly off the purchase price.

The other issue is the asking price. They used an appraisal from 2006 to justify the $165k asking price.

So my thoughts on this park, based on what I have learned is

9 x $195 x .3 x 12 x 10 = $63180 - $30000 = $33,180 offer

then fix the water lines and bill back water to tenants. I took the water cost out of the expenses provided and the expense ratio came to 70% for the past 4 years.

9 x $195 x .7 x 12 x 10 = $147,420 park value

On top of that I would need to evaluate rents (I'm guessing they can be raised) and work on moving people into the park (not as easy). Each new home raises value $16,380

I know it's a small park, but it would be my first one. It seems like a pretty straight forward turn around. Besides convincing this 80 year old widow that her park while has potential, isn't worth what she is asking.

So, my question is 'Is my line of thinking correct?'