After subtracting depreciation on the units themselves, which on mobile homes is a very real expense, I don't see much cash flow. Without knowing the age and condition of the mobile homes, it's tough to guess, but lets assume the units are 5 years old, and have a useful life of another 10 years. After 10 years they will need to be replaced with newer homes, say 5 years old. These can be obtained for say $25,000 each , or $400,000. So $400,000 divided by the 10 years remaining life is $40,000 per year. Subtracting $40K from the other expenses leaves no cash flow/profit. So unless the land is what we used to call a "tax payer", i.e. being held as a speculation for a large increase in value, I don't see this deal as being very good.
Income from the rental of developed spaces is preferable to income from renting spaces and homes, for the following reasons
1. Land doesn't depreciate, mobile homes do. So $100,000 income from renting space is a lot different than $100,000 income from renting space plus homes
2. People take better care of property they own than property they lease.
3. Maintenance and repair expenses associated with space rental is significantly less than maintenance and repair associated with space plus home.
4. The quality of tenants who own their mobile home and lease space is higher than those that lease the home and space
5. Parks which rent only the space have much lower turnover and vacancy expenses since if you own the home as a space tenant it's costly to move the mobile home to another park.
There are a hybrid type park which will sell the mobile home to a tenant that wants to be an owner. These types of parks could be very profitable. Unfortunately, the Dodd Frank Act, as well as the regulations of the Consumer Finance Protection Bureau, have made it very difficult for these type hybrid parks to operate anywhere near as profitably. I used to finance all three type mobile home parks, now I only finance the parks that own no mobile homes themselves.
