Mobile Home Park Analysis - Offer Price

[Bobby C.]

Hello all,
I am one email away from offering on my first MHP. I would like to run my numbers by you people who are much smarter and have more experience than I, so I don’t make a fool of myself.

The property is 32 units at $500,000, all park owned homes, quoted cap 10/12%:
Units: 32
Stated Rent: $266 per unit - $102,144 Gross Income
Expenses stated (2013): $40,266
NOI: $56,206

I have found several discrepancies in these numbers, deleted some and added or changed several such as property taxes, which were much higher than stated.
My numbers are as follows:

Gross Income- $102,144
GOI: $92,951 – Average vacancy in area is 9%
Expenses: $57,954
NOI $34,997 – 7% cap
Offer price, as I was quoted 10.12% Cap: $350,000

Will this make sense to the agent and owner as to how I arrived at this offer price? I want the property as cheap as possible, but I do not want to insult the owner so much as he will not negotiate further with me. This isn’t the only property I am looking at, but the best one I have found for value add opportunity and market.
Please let me know if I am not clear enough, or making any mistakes in my calculations!!!

[Jefferson Lilly]

STOP.  Do not do this deal.  Not at this price, and not yet anyway.

1. Buy the materials offered at mobilehomeuniversity.com.  Attend their bootcamp.  Get smart about the mobile home park business.

2. The numbers don't make sense.  Is $266 the lot rent?  Or is $266 the total rent per house (e.g. lot + house rent).  If it's the latter, then run, don't walk from this deal.  Any house worth only $266/month including land is not a house you want to own.  If thats lot rent only, then what are the ages and conditions of the 32 houses?  That'll swing the value of this deal enormously.

3. Who pays for the water and sewer?  And are you on city water/sewer, or well and septic?  What is the condition of the pipes?

4. What do average site-built house prices in this market cost?  That's your competition.  Stay away if the average house is $70k or below.

5. What is the average household income?  Stay away if below $40k.

6. How well are your test ads on CraigsList pulling?  You better be getting 20+ responses/week.

7. What is your plan to transition to RTO? You don't want to own those houses - only the land.