Mobile Home park evaluation

[Robert Meyer]

Hello all,

After talking and networking with a friend I have come across a possibly strong deal, but am unsure how to proceed since I am new to investing, and definitely new to mobile homes/parks. He has first come across the deal (he personally knows the owner) and wants to partner up to make this happen. He almost let it die, but we both see a lot of potential here so we are exploring different avenues. 

Here are the details:

36 Lots total

-31 park owned rented mobiles mostly all late 90's @500

-2 park owned rented doubles @700

-3 open lots (not sure how hard it is to fill open spots)

-Park will need a new road: quoted at 30K

-Septic tanks for sewer 2-3 trailers per tank

-water billed to park (opportunity to separately meter and increase revenue?)

-electric and trash billed directly to tenants

-taxes for the land are 2k/yr

-taxes for homes are 2500/yr

-Location is rural North Carolina, but seemingly desirable location

-maintenance 3500/month (seemed high but unfamiliar)

Total asking price is 870k= 540k land plus 330k homes (avg 10k each home) owner will carry 570k at 5% fixed for 15 yr and wants 300k down, but I only have about 75-100k I can contribute so I am looking into hard money at 12% interest only for a year or 2 and using the first year to sell trailers to the tenants at 10k each to get out of the hard money debt (exit strategy for private lenders is my pickle so far- what do you think about equity share or selling off trailers and collecting lot rent at 300 each?) My intent is to build cashflow as much as possible in my rentals in order to quit my day job and be home more with my family -I travel ALOT. My partner will be local and able to manage and I will be all over the united states. I am being told that there is room to increase rents, but I need to do more research and learn to determine that before I bank on it. 

Your thoughts are greatly appreciated. If you want/need any clarifying information just ask! If anyone experienced would like to partner up message me and we can see how to proceed. Thanks in advance!

Best,

Rob

[Mario Dattilo]

Look at demographics. If median Income for the zip code is low (less than $35k +/-), if market rents for a 2 or 3 bed apartment are pretty low under $600 and you see all the other parks are rental communities those are good signs that it is a rental market. One of the strongest indicators is home sales are sub $100k. If you’re seeing single family homes selling for $50k nobody is going to want a mobile home with rented land for the same price (and similar monthly payments). The numbers above are not hard and fast but when I see them below those I know it’s probably not good. 

If the market is checking the boxes above as more of a low income rental market I wouldn’t recommend buying it. Rental communities are more like horizontal apartment buildings and without getting into valuation you can end up overpaying compared to what a lender, appraiser, or future buyer will value it at. It will come with a higher expense ratio, a lot more turnover, more management intense, a lot of make ready costs, and require most staff/payroll. It kind of defeats the purpose of buying a MHP. 

Hope this helps.