Mobile Home Park... Deal or No Deal

[Rebecca Thacker]

I have read some really great Mobile Home Park deal analysis posts. However being new to the space (I have previously only flipped SFH), I would really appreciate opinions with experience on the specific deal detailed below.

Summary:

Asking price: $449,000; Annual Income $47,880 (95% occ.); Annual Expenses $13,282 (approx.); NOI: $34,598; Cap Rate 9.38

Details:

Income:

24 units at 100% occupancy (two units are wrapping up lease options) at $175 lot rent for monthly income of $4,200 or $50,400 annually.

24 water meters are purchased and included. Supposedly the park is on the schedule to get city water to the meters. Currently on wells and professionally managed for largest expense. This would require due diligence as it would greatly improve NOI.

Annual expenses: Taxes $2,741; Water $4,600; Septic $3,000 (5 septic systems); Electric $900; Extra Water Test $500 ($1500 every 3 years); Insurance $541, and I added an extra misc. of $1,000.  Total: $13,282

Thank you for considering responding and helping my education (and analysis paralysis). 

Rebecca 

[Frank Rolfe]

The expense ratio on a park of this size with private sewer is more like 40% to 50%, with a projected NOI range of around $25,000 to $30,000. At a price of $449,000 that equates to a cap rate of around 5.5% to 6.7% -- no way it's anywhere near 9.38%.

But the bigger problem is those are the cap rates if the property is in PERFECTLY USABLE CONDITION. You are telling me that there are meters to install, city water to install (plus probably road repair and other items) and those must all be deducted from the price as you will have to pay them at some point going forward.

The bottom line is that the asking price looks to me to be nuts and should be more like $300,000 less whatever the costs are to fix those infrastructure items -- so basically less than half of the asking price.

Just trying to keep you out of trouble.

I have not seen the park or the numbers so these guesses are just based on averages. It's possible it's the best deal of all time but not from where I sit.