Mobile Home Park Analysis

[Bryan H.]

So I met a guy that was speaking at my local REIA about landlording. I went specifically to speak with him because I knew he had a MHP and Ive been looking into possibly investing in this. So, come to find out he wants to sell his park and use the money to upgrade to a larger park.

It's a 12 lot park, with 11 lots rented. He said he keeps one strategically vacant in case something happens to a tenant's septic, he then has a place to move the trailer. So, 10 lots rent for $250/mo and 1 at $350. Total yearly income is $34,200. Operating expenses of taxes, insurance, electric, legal, repairs/maintenance & vacancy were listed at $7892. (23%)

He is asking $220,000. I know there is much I need to investigate about the park, but from a numbers perspective, would you proceed or pass?

What are your thoughts on leaving one lot vacant as 'insurance' against an issue with the septic?

I'd have to get a mortgage to purchase. Ive seen anywhere from 20-35% down, but haven't seen advertised interest rates, what can I expect? I just need a ballpark to plug into my figures. I am using 7% now, but wanted to get a better number.

Your feedback & advise is appreciated.

[Bryan H.]

Steven Johnson Here is what I learned about MHP investing

Traits of a good park to buy:
100% occupancy
100% owner occupants/no renters
city water/city sewer - separate meters, paid by residents
Low rents that can be raised to market rate. You buy off of production not potential.
CAP rates between 8-12% are typical
No extra structures, houses etc on site. They drive up expenses and the goal is to rent dirt.
Park manager lives onsite.

Ugly parks make money too, but bank financing may be more difficult. That's where owner financing is nice.