Advice on purchasing a mobile home park

[Zack Presnell]

I am looking at a mobile home park to purchase.  Details - 29 acre piece of land, gravel roads on property, 80-90 year model homes in well maintained conditioned, 22 homes and one older home, metered power to each home, well water. When I ran the numbers it hit the 2% rule. Actually 2.2%. My question to the seasoned/experienced investors in this arena is this: Do you evaluate the purchase price like a traditional stick built home/apartment or another method. Thank you in advance for your advice. Best Regards.

[Curt Smith]

Zack,  I have a group of investors who buy GA parks.  We might team up.  

I recommend the mobilehomeuniversity.com boot camp, both home study version and in person.  We did both.

Parks are not treated like SFRs.

All commercial deals need to be evaluated as if you where selling the deal, not buying it.  IE think like a bank who would be financing the sale, since down the road that is your plan right?

Since you didn;'t give the needed details I'm thinking you don't know enough about parks to know what is important.  Just saying that there's more to know.

I'll assume this park is 100% park owned homes and they rent them out.  This is the worst possible park configuration and these rural parks are most likely set up this way.   Banks hate park owned homes and will not recognize the home rent as reliable income.  Because it isn';t reliable income.  You evict or they go empty or get trashed all the time.

Call around to surrounding parks asking about how much is "lot rent".  Find parks that the occupants OWN the home and pay the park lot rent.

This is the way to price a park even if all park owned:

You ignore the home rent and price the park as if just lot rent.

(number of paying lots that are actually paying, not just total lot count) x (lot rent for the area) x 12 (months) x (0.7 figure a 30% expense ratio) = NOI

NOI / 0.1 (10% cap rate) + (some nominal value for the home say $3k) x (number of homes) = offer price.

Just guessing at $180 lot rent in Cleveland x 21 x 12 x 0.7 / 0.1 = $317k

I'd offer: 20% down, seller finances 80% at 5% 25yr amortization and a 7 yr baloon.

$63k down.  $254k financed at 5% is $17k/yr debt service.  Making cash flow = $34k-14k = $16k

or 25% cash on cash.  Which is our target for offers (if not a bit higher).

Good luck, curt