Mobile Home Park in TN

[Brahan Gamarra]

Hey everyone,

I have become obsessed with Mobile Home Park Investing. I continue to learn daily more about Parks and tracking down MHP owners to see if they would be interested in selling their Parks. 

I came across an MHP in TN that is 32 LOTS, on 3 10,000 gallon tanks septic tanks and all lots filled. The owner is asking for 800k and stated the MHP brings in 100k yearly. 

Lot rent for them is $175 and are all tenants' own homes. Seller stated he would be interested in doing seller financing if the down payment is 250k. 

I am fairly new to this but have built a solid relationship with the seller. Wondering if I have a decent deal here to work with? Any ideas as well where I can get financing options on this deal through a lender? 

Thank you, guys!

[Daniel Smithson]

I agree with @Chris Ebert on this one - try to get some actual numbers. You can ballpark these if he doesn't have records (many don't), but be super conservative and make sure to account for anything and everything you can think of in your own proforma.

If the park did pull in $100k, assuming a 40% expense ratio (this can go much higher on smaller properties unless you plan to self-manage), you're looking at a 7.5% CAP rate which isn't bad for a park in really good shape if you can get good lending terms and rate spread.

If it's maxed out currently at $67k per year, 40% expense ratio, you're dropping to a 5% CAP. Obviously, we don't know your deal criteria and that may be a great deal in your book, but the price seems high to me as it sits today unless you can get the terms you need to make it work.

How much upside do you have in the rents? Any of the big MSAs in TN will have lot rents much higher than that. I can only speak to Chattanooga, but we're currently in the $250 - $375 range depending on how far you are from downtown. That alone may change all of the dynamics of the deal.