First Time Mobile Home Park Investment

[Robert Lenfestey]

I have the opportunity to buy a mobile home park. I asked a broker I know about multifamily investing opportunities and he showed me this property.  It is not listed on the MLS. It is 5.7 acres, currently has 12 mobile homes on it renting between $430 and $563 a piece for a total monthly rent roll of $5854. The owner is asking $320,000. Real estate taxes are $2500 annually. It is close to being a 2% deal. The purchase price may be negotiable and the rent is slightly below market and could be raised to $6400 monthly which would make it a 2% deal. I would like to get the seller's actual maintenance and repair expenses for the past two years. I can also see a value add from raising the rent to market rates and adding more pads to the property. This is my first non SFH investment so I am a bit out of my element.

What additional information do I need to assess this deal?

How do I get the additional information? (Is it reasonable to request tax returns, or schedules)

[Russ Wallace]

@Robert Lenfestey you shouldn't assume more homes can be added to the mobile home park (MHP) until you've confirmed same with the appropriate jurisdictional authorities. Many land development ordinances include "trigger" clauses that mandate improving the entire park in order to expand the existing footprint. This is how jurisdictional authorities effectively "kill-off" older MHPs (and discourage development of new ones). Improvements can include widening/paving all interior roadways (to DOT standards), adding off-street paved parking, adding street lights, up-sizing onsite water/sewer lines, and site topo alteration (to enhance stormwater management). Expansion can also mandate the inspection of current homes by the public health authority which could result in the loss of rental income due to a home being declared uninhabitable. If the RE broker you mentioned is acting as your rep, he/she will know all of this if they have experience with managing due diligence investigations of MHPs. And, they should be willing to compile the following due diligence information for your review: who is jurisdictional authority; what is current zoning district; when were onsite water/sewer lines installed; who owns (maintains) onsite lines; when were onsite water/sewer lines last inspected; does seller have copies of onsite water/sewer lines "as-built" plans; if seller doesn't have as-builts, can they be obtained from jurisdictional authority; does seller have clear title to all park owned homes (POH); who are POH manufacturers and when were homes built; etc. In short, you should thoroughly investigate the site before commencing investigation of the property's financial performance or potential acquisition financing options. You may discover CapEx issues that wreck the property's appeal/valuation thus negating further investigation. Good Luck.