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Updated over 10 years ago,

User Stats

19
Posts
1
Votes
David Hughes
  • Real Estate Investor
  • Bentonville, AR
1
Votes |
19
Posts

Help evaluating Mobile Home Park and strategy to increase value

David Hughes
  • Real Estate Investor
  • Bentonville, AR
Posted

This is the first MHP deal I have analyzed and would like to hear your opinions about it--

---------

-104 total sites, 68 owner-occupied, 36 vacant on 3.5 acres

-On city water/sewer

-Lot rent is $310 and at market rate

-Assumable loan of $1,365,000, due June 2019, at 4.9% rate

-Buyer would need downpayment of $535k

-68 lots x $310 x 12 x .6 x 10 = $1,517,760 value at 10% cap

-List price is $1.9M

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If I paid the $535k down payment with a local bank loan for $435k at 6% amortized over 20 years after a cash downpayment of $100k, the monthly NOI, after 40% expenses and debt service (for both loans), would be $10k/month.

The value-add strategy I'm considering is to take that monthly 10k NOI and buy/move in homes until the park is full. If each relocated home costs $10k, it would take 3 years to fill the park.

At the end of those three years, the park would be 100% full (104 sites), monthly NOI would be about $18k and the park would be valued at $2.3M using a 10% cap.

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Questions

1. The list price is $400k higher than the calculated value of $1.5M… likely because the current owner sees the growth potential in the pro-forma numbers. How would you negotiate the price down to $1.5M?

2. Is my strategy sound regarding spending 36 months of NOI to fill the park with units so I can collect lot rents?

3. Would a local bank loan $435k on this deal?

4. Is this a deal worth pursuing?

Thanks, Dave

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