Mobile Home Park Analysis Help

[Bruce L.]

Hi Guys,

I came across this deal that I'm interested in and would appreciate your feedback as I've never owned a mobile home park before.

Details:

• Mobile Home Park
• Year Built - 1945
• Lot Size - 105,000SF
• Asking Price - $825K
• 60 Spaces
• Comes with Onsite Laundry (6 Washers & Dryer as extra income)
• Yearly Tax Bill: $4,300 (Have to double check, seems low)
• Income: Each space rents for $350/mo (Includes Water, Trash, Sewer)
• 40% vacancy (most of which are long term tenants)

I would consider this a D-Class area and needs rehab work, don't know the details yet. The property is surrounded by other multifamily, residential and commercial properties with nearby bus stops.

If moving forward, I would want to know the following:

• How much to insure property?
• What rehab work needs to be done and how much?
• How much is the Sewer, Water, and Trash Bill?
• How much does the property management co charge?
• What are the comparable rents in my area?
• Why is the property only 40% occupied?

Questions for BPers:

• What else would you ask when analyzing this deal?
• What would be the typical financing terms on a property such as this?

Thanks!!

[Brad Johnson]

Unfortunately, this Park is going to be difficult to finance, you’ll likely need seller financing unless you can find local bank that has a strong appetite for mobile home park loans. Most of the regional banks we talk to want to see 80%+ occupancy for MHP loans.

You should ask the seller if he has a loan on the property (to see if can even offer you seller financing) and if so, is the loan assumable.

Other questions:

• Is the park serviced by city water / city sewer?
• How many of the homes are park owned vs tenant owned?
• We always ask for three years of historical financials (P&L statements). Eventually you’ll want to get the property’s tax schedules (to see if they match the statements).
• I wouldn’t bother asking the seller’s opinion on lot rents in the area; I would just look up the competing parks on MHvillage.com. Some might list the current lot rent online, if not, give them a ring.
• How many of the lots are occupied by mobile homes vs RVs (is see a couple RVs in the photos). RVs are truly mobile and do not cost $3K-$7K to move (unlike “mobile” homes), therefore we do not place much value on RV lot rent.
• Are gas and electric directly billed to the tenants? If not, you might want run as private utility lines are very risk as you are essentially a mini utility company, if there is a gas leak, the city can shut down gas to your entire park.

Regarding seller financing, I would probably ask for a 10 year note, at 4.00% at 80%+ LTV. Given the age, location and condition of this park, and number of RVs, I wouldn't put much (if anything) down on this deal.

At first glance this deal looks like a pass, but perhaps you can get him to lower his asking price and carry a high LTV note. Another strategy would be to lease option the park from him. Perhaps the seller is just tired of dealing with it. This would give you a low risk opportunity to gain operational experience, upside exposure if things go well and a capped downside scenario.

Good luck!

Brad Johnson

www.parkstreetpartners.net