Should I Buy this Mobile Home Park?

Question

I found a 19 unit mobile home park for sale and was wanting some input on whether it is a good deal and some advice moving forward.  The price currently is $480,000 and it has 19 mobile homes, 1 single family home(3 BR, 2 BA, 1400 sq. ft.), 1 office building with a one bedroom apartment, and a shop with a garage.  I haven't gone out to take a look at the property yet, but from the pictures that are listed with the property it looks like everything is in order.

The mobile homes and single family home are making around $11,000 a month.  The person who rents the single family home is currently a maintenance man for the mobile homes.  The office apartment could be rented as well along with the shop possibly.  All homes are currently rented out and have tenants lined up.  All utilities are currently paid for by tenants.

So my questions are should I pursue this property?  I have a friend who is a real estate investor who thinks it is a good deal.  This would be my first property purchased as an investment.  I currently have a mortgage on a single family home that is $1100 a month and have a yearly salary of $67,000.  If it was a good deal, can I get a loan showing the homes rented out?  Or would I need to find the funds from someone and then go to a bank after purchasing the property?  Any advice or opinions are welcome!  Thanks in advance!

Zachary Bellinghausen · Answer

My bank that I plan on using for my next multi-family wants 25% down and wants 90% occupancy. They take a look at the deal and come up with the terms. If you can find a non-recourse loan, that may be better in your situation.

Lawrence P. Schnapf · Answer

For phase 1, need to examine condition of any above-ground tanks. does the MHP use on-site drinking water wells? if so, need water samples.  Does it have septic systems or public sewer? what was prior use of land (hopefully not a landfill)?

Hai Loc · Answer

definitely something worth taking a closer look. You need to reach out to a non traditional lender. They will lend based on lot rent so you need to know how much the average lot rent is.. homes in the park will not have much impact on the loan..

Alexander Ramirez · Answer

Hi Devin, I've done multi-family and hotel deals and I am now looking at MHP and RV Parks as I absolutely love the model. While MHP Parks can be a cash cow you have to make sure you buy right, and that there is an add-value component. MHP Parks are trading anywhere between a 10% - 13% cap rate so make sure you crunch the numbers and that you are in that range. I highly recommend that you listen to Bigger Pockets episode 361 (dealing with Mobile Homes themselves) and 339 (Frank Rolfe discusses MHP Investing) as a good place to start. Good luck!

Charlotte Dunford · Answer

@Devin Duval I am a mobile home park investor. Here's how I would evaluate it. do not use any income from the shop, SFH. Only count the lot rents with the tenant owned homes. For the park owned homes, use market rent as the lot rent and only count that when calculating NOI. Lot rent * number of pads * (1-30% expense ratio) * 12 months = NOI; NOI/10% should be your offer price. You should buy at 10% based on lot rents only and groom it into close to 20% at sale. Upon acquisition, I would consider selling off non-mobile home park related assets such as the shop and focus on the land business. Now, the extra income might be useful if your strategy is to make high profits purely based on operating cash flow, which is fine. But if you want to go through the refinancing or sale route, you'd need to sell these off and evaluate the deal different. It all depends on your business strategy.

Janice V. · Answer

@Devin Duval

Question; are the mobile homes owned by the tenant? If so, you have to calculate all the expenses including the repairs. Ideally, you’d want your tenant owning the mobile homes and they pay “lot” rent. Also, what’s your utilities situation? You mentioned tenants pay for utilities so I’m assuming it’s city and if it’s not you also have to calculate that as well in your expense.

In MHP it’s very crucial to know few things;

1. If tenant owns the homes

2. City utilities? Water, sewer

3. Location

Regarding the loan, you’d need to find a lender who understands the MHP space as most banks don’t loan these. Unless you have a good relationship in your local bank.

Hopefully this helps and also I highly suggest that you educate yourself more with MHP space as you may encounter few things that isn’t same as other multi family investment

Kevin Gendron · Answer

@Brian Ciuchta there’s one for sale near me. If you want more info shoot me a message!

Brian Ciuchta · Answer

I’ve also been in the market for my first mobile home park and have been doing a lot of research. Frank Rolfe puts on a bootcamp that covers everything you need to know before you purchase a park. I’d highly recommend looking into this. As far as a loan goes, you’re more likely to find financing if the tenants all own their own homes and you are just collecting the lot rent. If the park owns all the homes then you could be in for a repair and maintenance tsunami depending on the age of the trailers. As for the shop, you’ll definitely need to have a phase 1 environmental study done as part of your due diligence. Mobilehomeuniversity has a forum that is everything MHP. I’d get on that for sure if you’re going to get into the asset class. Good Luck and hit me up if you wanna chat more.

Devin Duval · Answer

@Hai Loc Thanks for your input!

Devin Duval · Answer

@Alexander Ramirez Thanks for the information!

Should I Buy this Mobile Home Park?

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