Wholesaling a Mobile Home Park

[Brandon Miller]

Hello,

My partner and I are in the process of getting an off-market mobile home park under contract. The park has 19 lots, a 4-unit building, a 3-unit building, a two-car garage, and a one-acre lot fenced in and ready for expansion. 5 of the mobile homes are park owned, 9 are tenant owned, and 5 have been converted to RV lots. All lots are on city water and sewer. All units are individually metered but the current owner pays all the utilities.

The park is located about 1 mile from the local city business district and is within 30 minutes of downtown Cincinnati.

All but one unit is currently rented out. The seller does not have leases in place and several people around the park help run it. This person is older and interested in selling and getting out of the game after 30+ years of investing. Most mobiles seem older but the park is not run down and the streets are clean.

We would love to purchase this property and slowly stabilize by charging the tenants utilities and bringing rent to market value, however, we have no experience with this. We have a limited expereince with single family flips and multifamily rentals but this is much different.

My analysis shows that currently we are buying this in the Cap Rate range of 16-18% including 5% maintenance and 10% for management. My question is, being in the midwest and given the fact that this property probably needs some work, what Cap Rate could we expect to get for this property once stabilized? We are debating how to proceed. We are considering an assignment of the contract and just making a fee because it seems like a lot to handle.

Additionally, the fenced lot seems like a fantastic opportunity to develop self-storage but again, we have no expereince. (There is a relatively new self-storage about 2 miles away.)

Thoughts?

Thank you for your thoughts!

[Brenden Mitchum]

Hey @Brandon Miller

Looks like you got yourself a pretty sweet deal on your hands, Brandon. Congrats, man!

Your exit cap rate depends on so many different factors that it is quite tough to guess at what it could be. First, how long do you expect the turnaround to take. If it's more than a year, guessing the cap rate is quite tough. Your best bet here is to ask multiple MHP brokers in your area. You can find a list of brokers here. Make sure you have a really clear idea of what the park will look like before you do. Will the streets be paved? Will all the houses look nice with skirting and no trash? 

Now what to do about that vacant acre? Is there any potential to add homes here? What is the zoning and will the county give you a hard time? 

If adding homes is not possible, self storage would not be a bad idea. However, keep in mind that, unless it has street frontage, the only customers you have will be your residents. If it does have street frontage, the closest SS is 2 miles away and there is demand for it in your area, definitely go this route. Lastly, you should also consider adding some outdoor space for your residents. Maybe a soccer field, some picnic tables and a couple grills.

Hope this helps a bit! Please, feel free to reach out anytime if you have other questions or just want to chat MHP.