My 1st MHP in upstate South Carolina

[Lawrence Allmond]

I'm considering buying my 1st MHP in upstate South Carolina. . Detail or as follow :

7 single wides occupied 

3 are 3bd / 4 are 2bd

Age: 1970's -1980's model 

• Owner pays water( city water/ sewer ,homes have HVAC units, current rents $400-450 per unit.

Park looks old and dated.But location is ok. Owner wants a $100,000. I'm concerned about the age as it relates to the maintenance:roofs,hvac,siding and etc...

Vacancies rate?

How much should you keep in reserve? 

What kind of insurance policy do you keep in place? 

What is it worth? 

[Jeffrey H.]

Ouch.  I would only buy a Park like this to quickly get those homes owned by the tenants either via a rent credit program or maybe even giving them to the tenants if they're good ones and long term.  The goal is to not repair mobile homes for a living.  I would estimate the value of the Park based on how I would want to run it.  If I want the Tenants to own their homes and make their repairs they would only be paying lot rent.  I assume $250 per month is reasonable for your area, but you can check nearby Park to see their rates and be competitive.  So 250 Lot Rent x 7 Lots x 40 (12 cap for 60% expense ratio) = $70,000.

If the homes are in good shape you may be able to come up some, but I would not pay much for them unless they're very new - never more than 5K each.  Older ones usually nothing.  You will need to inspect each home, make sure the owner has the Titles for all of them (otherwise it will take you lots of time and money to get them), and evaluate the tenants in them to see how quickly you can get the to own them.  It's an easy argument too - "hey I want you to own this home for $X,XXX cash.  After you buy it you only pay lot rent which is $250 per month and it will pay for itself after 12 months.  If the tenant doesn't want to buy the home do you really want them in the Park anyway - they have no goal of home ownership and that's not the type of tenant I want in my Park.

You won't get any economies of scale for a Park like this.  Your expenses will look really bad - you have to figure mowing, tree trimming, insurance, taxes, utilities, garbage, insurance (with homes too), repairs, management fees (either tenant does this or outside company), reserve for capital expenses, vacancy rate (for 7 pads will be something like 10%).

You should also submeter this Park and pass water and sewer along to Tenants to help your expenses.  After you do all this you will have a Park with a nice little 40-50% expense ratio, making somewhere around 10-14K per year Net Income.  At which point you could sell the thing for maybe 100K to 120K - will depend on your metro area some.  Small mobile home parks are not as marketable, so if you have to sell in a hurry it will be for a 15 cap or more.

This will take a lot of work to get it positioned the way you want it, or you can keep it a trailer park and operate it the way it sits today which will be a ton of recurring work in perpetuity.

Most would say there is not enough meat on the bone to make it worth their while, but if it's nearby and you want something to cut your teeth on would be an okay place to start.