MHP valuation. Please help me analyze this deal

[Steven Lalonde]

Hi BP community,

I am analyzing and collecting info on a small MHP in my area that I am interested in. Im asking for your help and advice on this deal.

The park is on 7 acres, currently has 12 pads, all tenant owned, $375/month pad rent, tenants do own yard work and maintenance, tenant pays for electric, owner pays for water/sewer/garbage/roads. On the property is also a large house. My family would move into this house, and potential to have a 3bed basement suite, $1600/month including utilities. As of now, the current owner splits the income 50/50, residential/commercial, so the expenses for the MHP are essentially 50% (if that is right?).

Water is a community system, no well. Sewer is x4 septics, one of those is for the house. The owner has been pumping the tanks every 4 years, one a year. There is potential to install water meters for each pad, and bill back water to the tenants. Park is on a paved road, road needs maintenance or full repair. I am looking into expansion potential. I am assuming I could get 6-8 more pads on the property, just due to the layout of the current park. I am budgeting $15,000 for each lot creation. RV or tiny homes are of interest to me as well. Potential to have a fenced RV storage or a mini storage. Estimation $600/month for income, maybe more.

Asking price is $950,000. The owners 50/50 income split, would mean they think the MHP is $475,000 and the house is $475,000. In my opinion, overhead map, the split could easily be 20/80, residential/commercial, especially if the expansion goes through.

Comparables of just single family houses in the area are selling for the $400,000 range. The house on the property is pretty decent. A large deck would need to have vinyl decking replace. There is a large in ground pool that is fully fenced and in good shape. I would be ok to pay in the $400,000 range for the house and the land it is on. The park, according my valuation is not worth the owners asking price of $475,000.

Owner provided their income/expenses:

$950,000 asking price

$54,000/year pad rents

11,000/year expenses for whole property (prop tax, insurance, water and garbage. Owner did not include any septic maintenance or other park maintenance, so I dont think this is fully accurate.

Based on owners 50/50 and income/expenses, they say their NOI is $49,000/year with a 10% cap. This only includes the 12 pad rents and not income on the house or RV storage.

I was hoping for some help evaluating this property. If you need more info, I would be glad to provide that.

Thanks,

Steve