Is this mobile home park a deal or dud?

[Eric Cecere]

Hello BP Community

My partner and I are interested in purchasing a mobile home and RV park directly from a small owner who is located in a rural part of Central Florida. The park should make money but we just have different opinions on whether or not it's a solid investment for our team and the future.

Asking price is $540K and our review and financial analysis shows an expense ratio between 30 to 35% and that the NOI will come in around $57K. Seller financing is being worked out but most likely will be around 25% down with ballon in 7 years.

The park is currently Operating on +/- 5 acres and has 14 spaces. The spaces are a combination of mobile homes and RV’s. Only three Park owned units which all mobiles from the 1980s that are in decent shape and rented. There are however currently three vacant spaces all with RV pads and possible hookups (not sure if they are working). Well water in good Standings with the local Health Department and a septic system that appears to be in working condition. This one septic system does maintain for the entire park. There is a long dirt road leading into the park and no highway frontage for the property.

No big employers in the area and most tenants in park are on government assistance or receiving social security. They are good folks and will all remain in the park should it sell. 

There is the possibility of expansion as we are going to get about 15 additional Acres that have not been developed yet. this would require a rezoning and submittal of plans of course and we are considering that option as well. The County is small but this should be something that is approved since it is out near other residential homes. If we bring in mobile homes or RVs we would attempt to get tenants on a rent-to-own basis in order to avoid overhead and maintenance. Again this parcel will not have any road frontage.

The county that this park is in has a population under 100K and the city has under 10K of that total. We do not normally operate Parks out in that small of a town so nervous about expanding and trying to get new tenants in place.

There is a park manager that would live on-site to maintain the park and is willing to stay on and help expansion if necessary.

Half of our team is not sure that we should purchase since it is in a small city with little plan for growth. Despite this the park is operating well and will make money this year. Park can be expanded potentially but area may not allow this value add play.

There is a city of 20K or more located about 5 minutes north and another located 20 mins south. Two larger cities with about 50K or more within 30 minutes. 

Any advice on working out in such a rural area? Can you offer any tips on refinancing mobile home and RV parks after expanding and increasing occupancy?

[Belinda Lopez]

Sounds like it might a very tight deal.  Could cash flow okay but what are your long-term plans for the park?  sell or just hold for cashflow?  Unless there is some sort of population growth on the horizon, I'd stay away from anything other than a decent cash flow opportunity.  Renting mobile homes is a tough road b/c they don't hold as well to tenants who tend to be harder on the homes.

Here are a few ideas you might think about:

• Owner finance out the MHs instead of renting-that shifts all maintenance to owner
• Buy a few more MHs and owner finance them out
• Try to add non-rent revenue -vending machines, even at small parks can add a thousand or so each month
• Lot rent increase

What is the current lot rent?  is there any room to push it up a bit?  That is the most common play in these type parks.  It's such a small park and your population is small so unless the park is just a steal and you can manage yourself it will be hard to grow it much.  

I've got an eBook on building MHPs and RV Parks that better outline some of the issues in trying to build or expand parks.