MHP - Off Market Deal - Need help analyzing.

[Jamin Olds]

Hey Everyone- 

I am currently in discussion with the owner of a 30 unit mobile home park and need some advice input.  I have studied MHP investing and this would be my first deal. I currently have 26 residential rental units. 

Here is the breakdown of the offer presented to me by the seller: 

Purchase Price: $400,000

30 unit park - 28 lots currently rented. 

Lot rent: $300

All trailers owned by residents. 

Monthly Income: $8,400. 

Total monthly expenses: $3,966.  This includes sewer, water, taxes, electric, and 30 year note. 

MONTHLY CASH FLOW: $4,434

This seems like a fairly good deal! I also know I can get it lower price than $400,000.  Am I missing something? Would you purchase this park? There are 4 parks in this town and this park is by far the best maintained etc.  Any advice, input, etc would be greatly appreciated. 

Thanks!

[Frank Rolfe]

This park would roughly produce the following net income:

28 x $300 x 12 x .6 = $60,480. At a $400,000 price, that's a cap rate of about 15%. So the price is great.

However, is this city water and sewer? And is the power or gas master-metered? That's not clear from your description and could have a huge impact on the cap rate.

Also, how big is the metro market, what's the median home price, and the average 3-bedroom apartment rent?

You'll also need to run a test ad.

I would go ahead and tie it up at that price, based on just that one item, and then do some preliminary diligence on the other issues. But sounds good so far.