Mobile Home Park - Lots to Like EXCEPT One Thing . . .

[Fred Venturini]

I'm finding a lot of mobile home parks that are not allowed to replace a mobile home once it is removed from the park. I've done my homework on these, and this is a new bit of information to me. Does anyone have any advice or other information on how to handle this situation, or how to property value it into an offer? What are people doing with empty mobile home parks? It creates a finite lifespan.

When the homes are tenant-owned, you can't really control rehab or maintenance costs, and they could presumably move on a whim and leave you holding the bag on an empty lot for the life of the property.

Take for example this MH park deal I looked at. Lots to like here - 19 pads, 18 are tenant-owned (1 is about to be rehabbed or removed after the owner passed away). City water, city sewer. Not individually metered, but lot rents look to absorb the costs rather well. I'm being conservative with my estimates, but it looks like it can generate 29k NOI with some upside.

The asking price is pretty high, I think: 395k, which is a 7 percent cap rate. Cash flow is around 4-5k with a 20 year loan factored in, but that isn't producing a cash on cash return that makes it worth burning up 80k in cash.

The owners say they had the property to use up the tax breaks and have exhausted them all, which makes it an attractive target to negotiate for seller financing (the installment sale presumably spreads out the tax hit over several years). I just think the ask is too high and I certainly don't like the feeling of permanently losing a unit due to the whims of an occupant, the lifespan of the home, or a natural disaster.