Small Mobile Home Park Analysis

[Allie J.]

Hi BP!

New investor here, looking to get into my first multifamily. I am particularly interested in a small mobile home park. I have found one and thought I would ask if any of you have any input on these numbers. As I am totally green, any thoughts are much appreciated:) 

-Located in PNW, for sale for 170 k. The sellers are "motivated," so it was hinted that any offer will be taken seriously. 

-It is a small (6 mobile home) park, and there is one single family home (7 total units for rental). All mobile homes are tenant owned, and supposedly stable/clean long term tenants. 

-Lot rent is 250. House rent is 600. 

-The park is on city water and sewer, so no lagoons or other gross stuff. The pads aren't individually metered, so I would look into what it would take to get each site on its own meter with the city.

-The approximate annual numbers they gave are: 

total rent = (6*250+600)*12 =25,200 (they did not include vacancy)

total expenses (water sewer trash taxes insurance maintenance) = 8,934

-Assuming these are right, this gives an NOI of 16,266

-Assuming I did 50k down on the 170k (which I think I could get lower PP), that would give a mortgage of 681/month at 5.5%.

-This gives a monthly cash flow of 631/month or 7,578/year. A cash on cash return of 16%? (~8k/50k)? And a cap rate of 9.6%. 

Any comments at all would be appreciated! As I'm writing this, I'm thinking I need to go ding this for vacancy (duh!). Are there any other obvious omissions from these data? Questions I should ask the sellers? 16% obviously sounds pretty nice for a supposedly easy to run park, so I am wondering what the "catch" is. 

Thanks in advance for any thoughts!

[Account Closed]

if water is included in the current lot rent then you will get a backlash from tenants when they suddenly have to start paying for this. As an option you can submeter  the lots yourself at a significant savings and bill the tenants for their water usage. I don't know what water and sewer rates are in your area but the cost of this for 7 units could easily run 4-5k a year. Lastly, how old are the homes on the rented lots. This could be more of an issue than you might think.