Hey BP,I have a deal under contract in Florida and I am considering the due diligence that I have found so far. The park is on well and septic systems. 1 well and 7 septic systems which have new components as of 2014. The park consists of 29 park owned homes. There are 2 vacant homes currently. Purchase price $875,000 with 20k seller credit for closing costsGross current income 188k, I am speculating the NOI to be half of that although the actual number seems to be quite a bit higher. The other two homes could rent for $650-750.Leases are month to monthThe homes are 1970-1990 SW modelsThe roads have been repaired recently, new electric systems, light rehabs to almost all the homes etcFinancing would consist of a 25% down 25-30yr amortization loan.Before I order the paid for inspections, what do you fellow investors think?Thanks!Kellen

29 park owned homes...I would not even consider buying. Far too much work. I would rather invest in a apartment building with less maintiance and fewer headaches.

@Kellen Driscoll you are getting some great candid guidance in this thread. Fundamentally, most MHP investors are seeking recession resistant cash flow, so the goal is to have zero POHs. That way, your tenants have a vested interest in staying in the park, regardless of what occurs in their life or the world around them. When you buy a park with all POHs, you are basically buying an apartment (but with more headaches) and the tenants can simply gather their belongings and leave anytime they want. I’m not suggesting there would never be a case to buy a park with all POHs, but there would need to be an extremely compelling reason (a price well below market, a ton of upside, or a 5 star location) to do that. And unless the demand for that particular location is recession proof, then you will want to sell all the homes and convert to all tenant owned. That’s no small task, so make sure it’s worth it. With that said, the most important variable you will need to ferret out is what the lot rent will be, once you sell the homes. Expand your radius to find comps, check the 2 bed apartment rents (they should be 2x lot rent), and run some test ads to sell one of your future homes to a tenant buyer. When you receive calls, you can ask them what they are finding out there. Collectively, that should give you a better handle what your competition is and what you will be able to charge for lot rent. Also, a 43% expense ratio is not very realistic for a small park with no city services and all POHs. Expect that to be a lot higher while you own the homes and come down closer to 50% after you’ve sold off all the homes. My gut says there are better opportunities out there so I would pass, but if you continue to pursue it, I would encourage you to be extremely conservative as you underwrite this deal. All the best, Jack

@Kellen Driscoll - Homes are rented for $650 and lot rent at the park across the street is $600. Lot rent as in the tenant owns their trailer and pays to rent the dirt. Is that correct? What else is included in the lot rent? Most newer MHP investors aren’t fans of POHs but the truth is the Southeast is full of parks that have some component of POHs. You won’t be doing many deals if all you plan to purchase is lot rental parks. Also the returns will be considerably lower. It’s way easier to manage and less room for improvement unless they haven’t raised rents to market, which does happen from time to time. POH parks usually have the most upside if they are mismanaged. So, if you sell off all the homes for a reasonable price ($5,000) and peg lot rent at $500, then you could buy down your basis a bit and reduce operating expenses considerably. With 29 homes sold at $5,000 and $500 lot rent, you should be between a 14-15 cap. I’d say that is a win. This is assuming you are in a decent location, not the middle of nowhere. Yes, it will be hard work but I would definitely consider if you have the capacity to make this work. FL is a little funky as well because parks have a prospectus that you have to abide by. Read carefully as they can deter you from certain actions.

@Jon Dorsey Hey Jon, There aren’t many comps in the area to compare. The smaller maintenance tasks are taken care of by the park manager. I have thought about trying to sell the homes back to the tenants as it looks like the majority of them have been there for a couple years atleast. I am coming up with at 43% expense ratio with the best numbers I can find. Thanks!

you would need to put a subdivision plat on on the ground or a condo plat.. to sell land and MH.. if your willing to risk private utls.. then there you have it.. Myself been there done that never again LOL.. I have owned 4 parks.. 1 had private utls and it was very very challenging.

Whats lot rent in the area vs POH rent?What business model are you going with: renting out POHs or trying to convert to all TOGs?Do you have a maintenance man?Are these seasonal renters (snowbirds) or long term renters? You mentioned the numbers are off. What are you showing for park vs homes inc/exp. You’re probably looking at a total expense ratio of 55-65% on this property: private water/sewer, POHs, smaller park.

@Kellen Driscoll1970 single wide trailers ... pass

30k/space sounds avg (my quick method). Do you plan to hold the units or sell those off and just rent the ground . This deal sounds like it is worth investigating to me.

@Jon Dorsey Hey Jon thanks for all the great advice! The 188,000 gross is actually on the 26 occupied homes, there are two additional homes that can be rented for roughly 700 as well.

As stated throughout, keep your underwriting/budgeting very conservative. You’ll probably find that the homes need a little TLC. Make a rotation to pump the septics so you’re being proactive instead of reactive and it’ll help spread out the costs. If you only have one pump on the well look into putting in a backup pump or drilling a second well. Based on your stated $188k gross income with 27 (2 vacant) POHs that comes out to $580/mo. Speculating you could set lot rent between $450-$500. Rough Valuation:MHP FMV: 450x27x60=$729kPOH Value: 29x5k=$145KTotal:$874kThis puts you in the ballpark and being close by will be needed. Write out your game plan and stick to it. Continue to educate yourself and don’t be afraid to ask for help. Get a good team in place (manager, maintenance man, handyman, private W/S techs, etc). Let us know how it goes.

Followed Discussions Followed Categories Followed People Followed Locations

Mobile Home Park Investing

Market News & Data

Market Trends & Data

Buying & Selling Real Estate

Out of State Investing

Real Estate News & Current Events

Real Estate Technology

Investor Mindset

General Info

BiggerPockets Exclusive PRO Area

PRO

General Real Estate Investing

BPCON

New Member Introductions

Questions About BiggerPockets & Official Site Announcements

Off Topic

Starting Out

Real Estate Success Stories

Real Estate Horror Stories

Real Estate Strategies

House Hacking

BRRRR - Buy, Rehab, Rent, Refinance, Repeat

Commercial Real Estate Investing

Mobile Home Park Investing

Innovative Strategies

Land & New Construction

Multi-Family and Apartment Investing

Wholesaling

Rehabbing & House Flipping

Short-Term & Vacation Rental Discussions presented by

Tax Liens & Mortgage Notes

Medium-Term Rentals

Buying & Selling Small Businesses

Outdoor Hospitality

Landlording & Rental Properties

General Landlording & Rental Properties

Managing Your Property

Marketing Your Property

Tenant Screening

First-Time Home Buyer

Real Estate Professionals

Mortgage Brokers & Lenders

Contractors

Real Estate Agent

Financial, Tax, & Legal

Personal Finance

Creative Real Estate Financing

Insurance

Private Lending & Conventional Mortgage Advice

Tax, SDIRAs & Cost Segregation presented by

Foreclosures

1031 Exchanges presented by

Goals, Business Plans & Entities

Legal & Legislation

Real Estate Classifieds

Classifieds

Real Estate Events & Meetups

Reviews & Feedback

Ask About A Real Estate Company

Real Estate Deal Analysis & Advice

Guru, Book, & Course Reviews

Syndications & Passive Real Estate Investing

Updated about 6 years ago, 12/28/2018

103
Posts: 10
Votes

Kellen DriscollPoster

Pro Member

Investor
Florida

Mobile Home Park Investing

Is this mobile home park deal a good deal?

Kellen DriscollPoster

Pro Member

Investor
Florida

Posted December 24, 2018 18:40

Hey BP,

I have a deal under contract in Florida and I am considering the due diligence that I have found so far. The park is on well and septic systems. 1 well and 7 septic systems which have new components as of 2014. The park consists of 29 park owned homes. There are 2 vacant homes currently.

Purchase price $875,000 with 20k seller credit for closing costs
Gross current income 188k, I am speculating the NOI to be half of that although the actual number seems to be quite a bit higher. The other two homes could rent for $650-750.
Leases are month to month
The homes are 1970-1990 SW models
The roads have been repaired recently, new electric systems, light rehabs to almost all the homes etc

Financing would consist of a 25% down 25-30yr amortization loan.

Before I order the paid for inspections, what do you fellow investors think?

Thanks!

Kellen

Kellen Driscoll

0 Votes

25 Replies

Jump to Last Reply

Sort By:

Oldest

Loading replies...

Your Profile Views

Curious to see who's interested in your profile? Unlock your views with Pro

Connect with others

7 day free trial. Cancel anytime.

PRO

Upgrade to Pro

Market Finder - key investor metrics for all US markets

Deal Finder - investor-focused filters and notifications for new properties

Calculators - Unlimited access to 9+ property analysis calculators

Find an Agent

Find & Match With an Investment Friendly Real Estate Agent

Enter your market to get started

Rent Estimator

Address or ZIP

loading related articles...