Mobile Home Park Preliminary Analysis - Newport, NC

[Padric Lynch]

BP!

I have been dedicating my time, energy, and resources to understand and find mobile home parks for sale in Craven, Carteret, and Onslow County areas in North Carolina. I found a park in Newport, NC that may have potential. I just walked the property with the owner and received the surface level information for the park. The park will definitely be a turnaround, value-add project. This is making it challenging for me to formulate an offer or to realize that this will be a money pit / time suck! This is what I currently know:

The Park

Location: Between two military bases and close to the beach.

-31 spots

-16 septic tanks (two spots to each tank)

-Lot rent $200

-5 Tenant owned homes (TOH)

-1 Park owned home (POH)

-About 3 vacant homes able to be renovated

-About 4 destroyed homes that need to be removed

-18 vacant spots

Income (monthly)

-$1,200, not including the POH rent, only lot rent.

Expenses (monthly)

-Trash $400

-Environmental inspections for homes moving in $40

-Street Lights $240

-Capex $40 (Roads, Well pump replacement)

(Still formulating what other monthly expenses there will be i.e insurance, management)

-Total: $720

Other Details

-On well water

-Individually metered for electric

-No property management

-About (1/3) of the park in a flood zone

-Flood zone spots require a FEMA foundation (2k-4k to build)

-Owner owns free and clear, seller finance is a possibility

I have been thinking about offering the following options to the owner:

1. $100,000.00 Cash/Bank Financed.

2. $118,250.00 Purchase Price, $10,000.00 Down Payment, 180 Month Term, $601.00 Monthly Payments, 6 Month delay in payments (In order to create cashflow).

3. $136,600.00 Purchase Price, $5,000.00 Down Payment, 240 Month Term, $548.00 Monthly Payments, 5 Month delay in payments.

4. $167,000.00 Purchase Price, $0.00 Down Payment, 360 Month Term, $464.00 Monthly Payments, 4 Month delay in payments.

The Downside

The moment I add in the seller finance debt service, the deal is negative cash flow by $100-300 each month. That is why I would have to delay the initial payments while I would be moving homes into the park. The price looks like it will have to slide to the left. I’m just debating whether the upside potential is worth the dig to get out of the red initially.

The Potential

I see myself filling up the park with a diversified mix of old to new homes, "renting to own" each, and raising the lot rent to market ($250). Endstate would be 31 TOH paying lot rent. That would be $93,000 in gross revenue. My incomplete/proforma for expenses has me guessing at about +/- $20,000. $73,000 NOI. At an 8% Cap the 100% paying/occupied property could be valued at $584,000.

Am I being too optimistic here?! Please, insights, opinions, words or caution are welcome. Rip into it! Thanks!

-Paddy