Mobile Home Park - Seeking review of deal analysis

[Michael Mies]

1st time analyzing mobile home park and would like some critical review from anyone that’s experienced with this type of investment…

Nine (9) unit mobile home park (seller owns mobile homes) located in the Charlotte NC area.

Seller asking $379,000 (seller has agreed to carry $265,930 at 4.5% with 5 year balloon)

4 acre country setting – property is in very good condition. Average age of mobile homes is approximately 20 years, but very well maintained. Less than $3,000 of deferred maintenance identified during inspections. Average tenancy term of 4 years for current tenants. One year leases intact – no rent increases in last 4 years (increasing rents 10% on lease renewals should not be a problem).

Raw land in area sells for $18,000/acre. Estimated cost to develop raw land into comparable park is $110,000. Estimated replacement cost of mobile homes is $15,000 per unit. Total estimated cost to replicate property is $317,000.

Owner provides water (community well), sewer (individual septic systems), outside street lights and general maintenance/repairs of mobile homes. Tenants responsible for lawn care.

Income - $62,100 ($575/month/unit average)

Vacancy (8%) - <$5,175> (<5% historical last 4 years)

Expenses - $23,331:

Taxes - $1,200

Insurance - $4,500

Maintenance/Repairs - $9,000

Utilities - $1,500

Advertising - $150

Administrative - $150

PM (12%) – $6,831

NOI - $33,776 (total cash outlay - $118,970)

Mortgage Payments - $1,347/month ($16,169)

Total cash flow end of year one - $17,607

Cumulative cash flow at end of year five - $94,927

Payoff of balloon payment at end of year five - $242,416

Cash ROI – 17.14%

Total ROI - 21.46%

BTY – I’ll be using my SDIRA to purchase this property and will use cash generated from property to fund flips with other investors (averaging 15% return). At the end of five years, I would either payoff the balloon note with additional SDIRA funds and hold for continued cash flow or simply sell to another investor.

Do these numbers appear in-line for mobile home parks?