Looking to buy mobile home park as first real estate deal

[Casey Doggett]

I am a new real estate investor and have been looking into single and multi-family units to get going with my investing but have come across a mobile home park for sale near me in Spokane, WA.  Certainly much more than I was looking to spend on my first deal but I guess when I'm all in I like to go big.  Looking for some help/info from people that have some experience or knowledge in the area or even maybe that would be interested in partnering on a deal.

Is a 55 Unit mobile home park built around 1971

Currently has 27 tenant owned homes renting for $250 each

17 park owned rentals renting between $475-650 (dont have specifics on this yet)

My rough calculation is about $15,250 NOI monthly currently at this vacancy

Looks like 11 spots unfilled 

Uses on-site septic and well 

Looks like good size piece of land, 22 acres

Located on the outskirts of bigger city (Spokane) so not too populated, maybe not most desirable location, possibly look into having some RV sites added if not already there as this area is highly traveled??

Asking price: $1,150,000

Las tax valuation in 2017 was $938,930

Annual taxes $10,200

Cap rate (as given by seller): 9.19%

Would be looking to put down 20-25% with my own cash and probably help from a partner and talk to bank about financing options to buy although haven't talked with bank yet

Have not yet been out to look at it so not sure of condition of park/homes.

Looks like an interesting deal as it is a decent sized park that could generate some cash flow but I am concerned about the vacancies and location???  Any good advice from anyone on if this sounds like a good/bad deal would be greatly appreciated.

Casey Doggett D.O.

[Adam Johnson]

I'm too far away to comment on location.  I like to drive through competitive parks to get a feel for their occupancy/vacancy.  If area parks have a lot of  empty lots, you will likely have slower absorption.  If they are full or nearly full, that is an indicator of stable or rising demand.  Find out what they charge for lot rent and what is included too.

I don't give much value to rental income from homes and many lenders also ignore that income stream.  I prefer to rent the space only, with the homes being owned by the occupant.  Try to determine if the other homes are all owner-occupied.  Investor owned homes in a park can get real tricky if/when you have an eviction.

Well and septic generally push the value down.  Some park buyers avoid them altogether.  Learn more about the age of all infrastructure that you are responsible for.  These are big ticket items when it comes time to replace/update.

My first reaction to the seller's cap rate is that it is pretty rich (he's dreaming).  This is a modest size park, but too small for institutional investors to drool over.  They tend to attract higher valuation/lower cap rate.  If the rental income from the homes is included in the income, the seller's numbers are already skewed.

With all that said, keep digging for details.  Might be worth it, even if it proves only to be a "practice" deal analysis.  You should always have some vacancy with a property this size.  If you don't, your rent is too low.  11 out of 55 vacant might be a touch high, see what the current owner/manager is doing to rent lots.  If they aren't doing anything to rent them, that may be the problem.  If they are turning themselves inside out and still not renting lots, then the market may not carry any more.

I own one park so far and actively looking for more.  I'm not an expert, but do have a few years experience.  Our park is well and septic.  When we took over, occupancy was below 40% and it was pretty much a mess.  We paid a price accurate for the amount of work that had to be done.  We still have a long way to go, but are making good progress.