40-Space Mobile Home & RV Park in North Carolina

[Travis Dillard]

Investment Info:

Mobile home buy & hold investment in New Bern.

Purchase price: $1,080,000
Cash invested: $270,000

Contributors:
Mitchell England

Bridgeton RV & Mobile Village is located in New Bern, NC., a nice, quiet, coastal market. The property is about 8 acres and consists of 40 spaces which includes 20 mobile home pads, 20 long-term RV Pads, and a stick-built barn for storage and laundry. The park is full of trees, grass, a community garden, and a pet run. We inherited about 10 Park Owned Homes (POH) and campers in the purchase. The residents love the fact that it's quiet, well maintained, and has lots of space.

What made you interested in investing in this type of deal?

We were primarily interested in finding a mobile home park that was priced at a 10% cap rate (on lot rent only), generated over 20% cash-on-cash returns, had good management in place, was in a good market, and had a light value-add component.

How did you find this deal and how did you negotiate it?

We found the property on Crexi. We initially negotiated with the selling broker, and then eventually the seller. In fact, we actually stayed at the seller's house, adjacent to the property, while we were in negotiations .

How did you finance this deal?

We used a regional bank that has a fantastic appetite for MHP. The note is amortized at 25 years with 75% LTV.

How did you add value to the deal?

We've added a fenced dog run and community garden. We're in the process of adding laundry and sub-metering the electric connections with Metron meters, integrated with our Rent Manager software, once Metron makes them available. Since acquisition, we've sold off some of the POH inventory. We've also raised lot rents from $280 to $300 / month. We've also experimented with, and made some management changes.

What was the outcome?

The inexpensive value-add projects improved the lives of the tenants, especially during this COVID-19 time. We've improved occupancy from 85% to 95% and increased NOI.

Lessons learned? Challenges?

The RV component is tough. The previous owner would convert a single MH pad to 2-3 RV pads, swapping out a single pad rent of $280 for 2-3 pads at $450-$500 each (including utilities). The economics are exciting, but RV pads should be underwritten differently to account for increased vacancy, turn expense, and ultimately, a higher cap rate. It's much easier for somebody to hook up their truck to the RV and move, they don't even have to move furniture.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

American Commerce Bank has been great to work with. They also have an appetite for, and see the upside in MHP, which is refreshing.