Help me critique this mobile home park

[Zac P.]

Hey gang, what's your thoughts on this? The world of mobile home park investing is new to me.

21 spots (+5 empty spots that are ready for trailers)

$150 lot rent for all. $450 for anyone on rent to own (There are 4-5 of those, the rest own their own outright)

Tenants pay all utilities

City electric/water/sewer

Landlord utilities and expenses are just trash ($150 per month) and then taxes/insurance. Due to trailers being owned by tenants and the others being rent to own, maintenance should be minimal to nothing. Trailers are in ok condition (average at best). 

Seller is asking $325,000.

Thanks in advance!

[Frank Rolfe]

16 x $150 x 12 x .6 = $17,280 divided by $325,000 = 5.3% cap rate.

To make this deal work you would need to be able to push the rents up substantially (like $100 or more over 3 years) and to fill the 5 vacant lots with cheap used homes.

If you model the maximum value this park would then have under that scenario: 21 x $250 x 12 x .6 = 37,800 divided by an 8.5% cap rate (the lowest you'll probably get ever) = $444,705.

Using a standard risk/reward metric, that means that you can't possibly pay $325,000 for something that would only be worth on its best day ever $444,705 several years into the future. And that does not even include whatever cap-x is needed to bring the old park back to life (utility lines, roads, home reno., etc.).

The price on this deal needs to be more like $220,000 to make sense. At $325,000 only the seller is making money with this deal.