22 Lot park Questions

[Jeff McNutt]

This is my first time looking into a mobile home park.  I have flipped 3 homes and I am closing on my first by and hold next month.  I was hoping for some advise from the community on a mobile home park I am looking at.  Here are the numbers.

5 Acres  in Missouri

22 Lots

13 rented at $260 a month

4 empty lots

3 park owned trailers not occupied

2 abandoned trailers

There is a Laundry mat on site which is not operational (hasn't been for 18 months) and a small 2/1 apt on the back of this building (not being rented)

Asking $250,000  

They say there is a Gross Op income of $43,000, Exp of $21,000, for NOI of $22,000. (I know 13x$260 is not 43,000, not sure what else they are including at this point.)

I feel the asking is too high.  I am thinking closer to $160,000 with these initial numbers.  The 5 trailers not occupied need to be removed (no idea yet on the cost of that).  The county will not allow new pads to be added to open acreage.  Any thoughts on this I now the details are probably too vague.  Typical cap rates in Missouri for trailer court? Costs to remove Trailers? Bring new one in?  Additional Resources I can look into.  I have listened to all the podcast on Mobile home investing twice.  I am trying to become as educated as possible.

[Rudy Curtler]

@jeff mcnutt...I own 4 MH parks (and was featured in podcast #195 on the subject), this doesn't make me an expert, but I have formulated a couple of opinions on the subject :-).  Lots of great comments from other members above, btw!  To highlight one of the comments that I think is the biggest thing to think about:  What's the demand for affordable housing in this community?  If you buy this park, buy it for TODAY's lot rental income, exclusive of the rents for the park owned homes and the laundromat and not at a projected or 'pro forma' assumption.   Is the community growing?  Are normal stick built home prices in the community rising to the point that they are pricing out the entry level buyer?  If you can buy it right (i.e, $200k or less), there are options for buying smaller single wides (expect a NEW small 2br/1ba to run you $30-35k after home, freight and set up) to fill in the current vacant lots and the lots where you scrape off some of the duds.  Can you sell a $35k MH in your community or would you be competing with stick built homes at that or near that price?  Also, if you can't sell NEW homes, could you buy a couple used homes off Craigslist?  This gets risky because the older they are, the harder they are to move without causing lots of structural damage and your community may have ordinances that limit the age of homes that you can bring in---worth checking with the local planning/zoning office.  Another big consideration:...what are the lot sizes and are you boxed in to buying small units just to fit the current lot sizes?  Or can you go bigger?  If you go bigger, can you sell homes in those price ranges?  (as you can tell, I am a proponent of selling the MH, not renting them...in my experience, they end up being money pits)  Hopefully these questions are helpful...I am a fan of smaller parks, but like most real estate, the key is buying right. 

Rudy