Looking for Help Analyzing Potential Mobile Home Park Deal

[Greg Myroth]

Jefferson Lily's podcast on Mobile Home Park Investing got me excited about potentially investing in a park. I have been actively reading all I can and searching for deals. I am curious what experienced park investors think about this potential opportunity. 17 homes. 16 currently rented. Many long-term tenants. The combined trailer and lot rental is currently at approximately $400/mo. Monthly income of $6795. Expenses: Water $600/mo. Garbage $350/mo. Insurance $350/mo. Common area lighting $75/mo. Taxes $7100/yr. Estimated maintenance assumed $500/mo, Management assumed $500/mo. Capex assumed $400/mo. City water and City sewer. Homes are all currently well maintained and all our seller owned (none are owned by tenants) which I understand is not preferred. Property is in a good part of the City. Also has several garages onsite that are not currently rented. There is extra 1 ac available for future development possibly self storage units. Asking price is just under $300,000. What are your thoughts on the price and the viability of this deal? What value do you assume for trailers and lots? Looking forward to everyone's feedback on this one! Thanks in advance!

[Curt Smith]

From Dave and Frank'/s boot camp the standard valuation formula based on NOI (as apposed to value Don used)

(lots paying rent) x 12 x (rent (lot or home rent) x (expense factor see below) = NOI.

expense factor if 100% lot rent is: 0.3 or 30%, expense factor is at minimum 0.5 for park owned homes.  

Then divide NOI by the cap rate you need (std in MHP industry for medium sized well run parks is 10%) so divide by 0.1. Smaller parks, worse run, trashed, cap rate goes up, even to 15% or divide by 0.15. Then add in the nominal value of the MHs. Use Craigslist.org to price a similar mobile home. A nominal value is $3k to $5k each.

You plug the numbers and offer at no less than 12% cap for such a small park.  I think you'll calc that $300k is very over priced.  Park paid water, bad!

The #1 issue with small parks is: do you live near by? How will you manage a low end 100% rental commercial business? Not enough NOI to pay someone, you are buying a job with these small parks.

So many bad stories about Prop Managers just running a park down.  They have no understanding of the need to walk the park several times a month, inspect the inside of EVERY home no less than every 3 months.  Charge for fixing holes in the walls etc.  They do just happen in this rental class.