Master lease option structuring Mobile Home Park

[Joel Ortiz]

I found a mobile home park available for purchase for $895,000 I would like to offer a master lease option. How would you structure  it?

The park is 100 spaces and has 14 current mobile homes on the property. All pads for existing, electrical, sewer. Everything is sad metered and Bill to the tenants. Half the electrical is in the ground and half of it is in the air.

Current rent 250 - $275

Market rent $350

 Projected occupancy 90%

Current net income $34,000

Myplan: .. find investors looking to $30,000 and offer a 10 year investment at 10% for a single mobile home. Sell my mobile home to a buyer so I don't have to do any repairs.

My structuring idea: $100,000 down or $200,000 down? 3 year lease at . $3,000 with option to purchase at $900,000

What are your thoughts on down payment, monthly payment, Lease length and option price?

Please see my question on which homes to buy

https://www.biggerpockets.com/forums/30-mobile-hom...

[Frank Rolfe]

This is a very hard park to do a Master Lease on. The current value of the real property is 14 lots x $250 per month x .5 x 10 = $210,000. All of the value you want to tap into is only by virtue of filling the vacant lots. Programs like the CASH program by Clayton/21st Mortgage might work to fill lots, but they will only do that if you OWN the park, and not Master Lease it. Plus, you really don't want to put capital into a park you don't own (and filling lots is capital intensive) since there's always the remote possibility the owner may go sideways on you when you try to elect the option of buying.

A better plan would be to buy the park and have the seller carry the debt at a low interest rate with nothing down. The argument would be that you need the down payment money to fill the vacant lots, and you are only improving the value of the collateral with each new lot occupied.

The other problem here is that you have to pay less than $895,000 -- that's too much for what he has. However, at the same time $210,000 is probably too low. A 100 space park today would cost over $2 million to build, but the value still has to tie back to the income. If you can pull off the concept, the returns would be extremely high. But you have to structure it fairly for both sides. 

The bottom line is the that the seller has to be an active player in the deal by providing extremely attractive financing and a low down payment -- and the price must be more fair.