Mobile Home Park- Is this a good deal? Underestimating Expenses?

[Connor Cogdill]

Asking $600k
11 Spaces All Occupied

8 TOH- $285 per month
3 POH- $1300 (Section 8), $900, $750
Single Story House- $775 monthly
Gross Monthly Income- $6005
Gross $72k

Without Due Diligence-Owners Expenses: Maybe $200 per month insurance, $150 for electricity for the Well Pump, $100 for the Trash bin, Taxes $2400 per year (currently), 
Fixed Expenses= $7800 yearly

Variable Expenses
8% Vacancy-$480
5% Repairs-$300
5% CapEx-$300
=1,080 Variable Expenses Monthly.  $12,960 yearly
I may be way under for expenses, especially with septic.

$72,000-$12,960= NOI $59,040

59,040/600,000=9.84% Cap
 
This park has dirt roads, 3 septic systems,  1 well pump.   

3 miles away two MH parks have city sewer and water. Paved Roads, $600 lot rent. One of the two parks offers free utilities but tenants have to bring their own trailers(It's newly built), The other park has its own trailers $600 lot rent-utilities not included.

I would increase the lot rent up to $400. I would increase all the POH to $1300 rent.
Extra $1,479 a month income from the POHs. Extra $920 from TOHs.
Extra 2,399 per month, $28,788 yearly.

If people moved out could have more Section 8 or veteran tenants. More Maintenance but more cash flow.  

New Estimate:   87,828/600,000=14.6% Cap.   87,828/.0984=$892,560 value at old cap rate.

Would partner with my twin brother. Could I be 4 hours away from an MHP that has septic? My family owns a couple of parks but none with septic before.  My brother would be in the same area of it all the time. I can always drive the next day.  Is this idea realistic?

[Mario Dattilo]

Only include lot rent in the income. Don’t include the home rent portion to the income. Instead value the homes for what you can sell them quickly as is. Valuing home income will have you overpaying for the property. Check out some MHP investor tools in my profile. Hope this helps!