Mobile Home Park Deal? Analyzing my first MH Park.

[Jacob Price]

So after a good search, I've stumbled upon what seems to be a decent deal, but I wanted to get some more eyes and opinions as I've only done one deal and I have all of BiggerPockets at my fingertips with this post! After listening to a lot of podcast where mobile home parks get brought up, especially by @Brandon Turner, I was interested to see what I could find. I have not went and looked at this in person, but intend too today after I get off from work, but let's take a look at my 'deal'.

Background on the area: This town was like the center for all furniture making back in it's hay day prior to the factories moving out of country. It still is very much a blue collar working neighborhood, more rural, but not ghetto. I'd rate most multi families and this mobile home park as being in a B- type area. 

Land: 8 acres

Occupied Lots: 14 

Vacant Lots: 5

Total Lots: 19

Utilities: Tenant Pays

Avg MH lot rent:  $160

Financials *Provided by seller: 

Gross Income	$36,000
Operating Expense	$5,000
Net Operating Income	$31,000
Expense Ratio	13.9%

Listed Price: 195k

Additional Information: Where I found the listing it shows that it had been listed since 2010, but just recently it had the price reduced to the price stated above. I'm not sure how much it was reduced or what it was listed for prior to that. The owner lives in Florida, probably retired if I had to guess. 

Looking at this my first thought is that the seller has assumed FULL occupancy for these numbers, however I will check to find out. Based off google street-view and satellite the area looks fine, but I will touch back after I visit today. 

At this point I will assume that the numbers listed are full occupancy in which that would be maxed out without raising rents etc. I'm not sure if the rents are extremely low or not, though glancing at parks nearby they seem slightly lower. I don't want to give a definitive, but it appears that it would be reasonable to raise rent. 

Once again assuming that the seller is calculating on full occupancy, I hope they aren't, but it would be $2,240 a month based off the avg rent and 14 occupied lots. Which is roughly 1.15% per month return based off the listed price.

Appears that it has $615 in taxes, but I presume that is added into the operating expense. 

Should this be a deal, how would I get financing?

Well I did my last deal as a partner with my father, and I discussed briefly about checking this out to see if it would be worth it, so should it be a deal then I would discuss with him and see what our options are. Most of my cash is depleted from the last deal a few months ago, but I'm open to suggestions about creative financing options that anyone has had success with for MH parks. I feel that I have read they are hard to get traditional financing for. Perhaps if it is a deal and I want to pursue it, since the owner has had  a hard time selling, I could get him to do a creative seller financing route.

Closing thoughts: I somewhat avoid this area as I view it as not up to par with what I'd like to be doing, but I have seen a lot of fantastic deals around here. I feel that a lot of investors avoid it as it is an older country area with a lot of blue collar, lower wage earning, locals. As my father said before 'Everyone has to live somewhere'. These locals aren't trashy, it's just a lower cost of living and such. Honestly I feel that it could be a great place to look for many more deals simply because there aren't a lot of investors grabbing up all the deals. Though... My practical side says that, if people aren't investing here, there's probably a reason. After looking at several deals in this area and running the numbers, I see that cash flow wise it is great with fantastic returns around here, but appreciation is going to be very limited. I don't see it going down more, but I don't foresee a 5% increase annually either. 

Let me know what you think and what you would look into! Thanks BP

If this should be under deal analysis, I apologize in advance. 

[Account Closed]

@Jacob Price, quick red flag is you referene back in the hay day before factories moved out.  Is it in a town of decline?  Thats a big red flag .  You will want to get a good grip on the area , are employers leaving, coming, expanding, shutting down? 

Lots of land for the amount of acres.  Density could be 7-10 homes per acre.  The question then is each home on a 1/2 acre lot or the homes take up 2 acres with the rest of the thing vacant?  If its the latter of the two, you will want to see if there is a way you can keep the park and partion off the land ( to reduce your cost basis) .  You can also analyze the scenario as a possible expansion but wont dig into that. 

Occupied lots at lot rent of 160lot rentx14lotsx12 months = 26880 gross lot rents. lets use an arbitrary 50% expense ratio ( which may or may not be accurate so NOI of 13,440. Lets say the property is valued at a 10 cap so 134k , realistically this might be more of a 12 cap deal so 112k value.

There is a discrepancy with the sellers gross income and what we comp for the lot rent.  This could be due to some park owned homes and you might add in some value for those, or not. 

The property would probably need to be a seller financed deal  or cash.  You can always try to get bank financing, but a commercial property at this low a value I'm not sure id bank on it. 

You don't give value for the empty lots.  The most important info about the utilities we don't have Water and sewer . That can change the valuation quite a bit.  If the lot rents for the market are 250, that changes the deal. 

You really need to dig into the market , it sounds like you are uncertain about the area. If its going down the drain, i wouldn't take the deal at 100 grand.  You can fix up a property , but not even superman himself can make a market turn.  I would take a crappy property in a great market though ( if it can be improved or fixed) , i would be reluctant to take even a great property in a declining market.  

Good luck .