All Forum Posts by: Marshall M.

Sounds like a decent find. For back of the napkin use rents times occupied pads with 40-50% expense ratio and a ten cap. Adjust accordingly based on upside and location.

Good one!

This is terrific! Thanks for sharing!

@Robert Livero on the deal being overvalued. The essence of this business is to rent the land to the homeowner. When the park owns the homes there's a certain stigma due to the higher expense ratio and cap-ex spend associated with rental homes, especially older ones. For back of the envelope, I would assume a cap rate close to 15% and an expense ratio close to 50%. Don't underwrite the income from the lots that aren't producing. Personally, given the limited upside, I'd pass on this one! 

@Jaden Ghylin 

1) Awesome that you've got a partner that owns MHPs. That's very helpful. To answer your question, even if you're selling homes for dirt cheap, mobile homes can take a while to sell. Hate to be a bearer of bad news, but generally speaking, lease-up in mobile home parks takes many years, not months, even if you're in a really hot area (some possible exceptions include parts of Florida and California). I would underwrite about five sales per year, which is a bit on the conservative side, so you're looking at about 13.5 years for just the 67 new homes to the property, not including the abandoned homes. 

2) Good that it's not in a flood zone. The downside about private waste water treatment is just what you describe with the park requiring substantial cap-ex when they are not properly maintained. If you can get comfortable with this, you'll have a serious edge over other investors. 

3) On cap rate, I've seen some sub-10 cap rates on properties that have needed hook ups to public sewer and on properties that have run out of water in the wells. This industry is getting a lot of attention from financial funds which has definitely drive cap rates down. I'm sure you have a target return that you need to meet that is driving a range of price you are willing to pay. From what it sounds like, hopefully you've underwritten this conservatively and have an additional expense contingency priced into your model. 

4) Looks like you have done a good amount of due diligence. If you find that your numbers work, you're comfortable with its physical condition, you've got the capital and you have the patience to see this play out then you might just be in a good position to go through with this deal. 

Best of luck. Keep us posted. I'd love to hear how it goes. 

@Jaden Ghylin funny you bring this up, I was just looking at Minnesota parks today! 

Anyways having worked on a lot of deals, here's my two cents:

1. Have you managed a mobile home park before? It's not a single family home and it's not an apartment. Bringing in 67 homes will be expensive and time consuming. In short it could take years to fill up those lots with home owners. If you rent the homes you risk not finding a solid buyer due to having a high percentage of park owned homes (not everybody likes them).

2. What do you mean by the lagoon needs work? If it's in a flood zone you really need to make sure you can even use the lots that are currently vacant (e.g. Has the property flooded before?)

3. Cap rates in this business have been at all time lows in this business. If it's in excellent condition you can expect to pay a six cap, if it's not then maybe a nine or a ten is in the cards. There's no hard and fast rule that mandates a ten cap in this business.

4. What diligence have you done so far besides running the broker's numbers? Did you notice that the park has some very aggressive rent and move in specials? Shouldn't that make you wonder why the occupancy isn't higher?

I don't think this is a business for flipping unless you have a long term outlook and believe in the location. But who knows! This park could be great and I could be totally wrong. 

Happy to help if you've got more questions.

To answer the question asked, yes you can find them on Loopnet, http://www.loopnet.com/Mobile-Home-RV-Parks-For-Sa...

Is it a good idea? Probably not. Try craigslist, call brokers, look at CBRE, ARA, etc. the best deals will never show up on the net, but will be done completely off market. Properties sit (and show up online) when they're not priced correctly and the biggest mistake you can make in this business is to overpay for something.

Only ten lots each, why not do both? Just need leases, bills and bank statements. I also recommend getting an engineering/environmental report if the property is on private water and waste water treatment plants or has any underground tanks. 

4% is average across the table

Short answer yes.