Need Advice on Mobile Home Park Deal in Phoenix, AZ

[Ciro Affronti]

Hey BP Community!

We recently purchased a 24 unit apartment building in the Camelback East area (85016 zip) in Phoenix, Arizona. The property was purchased from an out of state investor who owned multiple properties in the area. Turns out he also owns a 30+ unit MHP and a 4 unit multi-family that are the lots right next to our property. He basically owned the entire street and sold us the main property in the portfolio, and now wants to sell the rest.

The seller is represented by his agent here in Phoenix, and we have built a good relationship with him since the purchase. He is the one bringing us the deal for the mobile home park and 4-plex and trying to convince us to buy it off market. We love the idea of buying the two lots next to our property, as that would bring us a total of over 4 acres of land in an up and coming area in Phoenix. We love the 4plex, but have never invested in an MHP before, and are unsure about what these assets are valued at.

Deal Highlights:

• MHP is fully occupied on month to month leases, cash flow positive.
• Adds 2 acres of land and 34 more doors to our portfolio.
• Seller is looking to sell the portfolio as a package (MHP and 4-plex, won't sell separately)
• Seller is valuing the properties for sale at a 5.5-6% CAP (total purchase price they're asking for is $1.7 million.)

I would love any insight I can get on MHP investing, and specifically MHP investing in the Phoenix area. What CAP rates do these properties trade at? To me a 6 CAP for a run down mobile home park is insane, but it seems that all commercial properties in Phoenix right now are trading at 5-6 CAPs. Tips on what to look for in the deal, pro's and cons, hazards to look out for, etc would be greatly appreciated.

Happy investing!

[Ian Tudor]

@Ciro Affronti - I own several mobile home parks. Valuation seems very high for a park. However, I know parks are trading at higher valuations out West. I usually buy parks between 8-10% with immediate upside. 

Unless it is a covered land play or there is some sort of large value unlock available, it feels super rich.