All Forum Posts by: Michael Lyons

Thanks for the feedback.  This is helpful.

We are under contract for a 33 lot MHP with a financing contingency.  This will be our first park.  The bank says they will loan on either the purchase price or the appraisal price - whichever is lowest.   We will be putting 20% down and financing the rest of the park.  Does anyone have any tips for the park appraisal?  My understanding is that we cannot pick the appraiser.  Is there anything we can do to make sure the appraisal is favorable?  Can we provide comps for recent park sales?  Does anyone suggest having the owner meet the appraiser on site?  Any other tips?  Thanks in advance!

Jim,

Thanks for the response.  Would you be willing to share that letter?  Have you done any consulting for first time MHP buyers?  I would be interested in discussing a few items with you for fee.  I can contact you via your website.

I am looking at a park with about 35 lots with tenant owned homes.  They are sub metered for all utilities from the town and the trash collection is done by the township.  Everyone must mow their own lawn and keep their home in acceptable condition and the few empty lots are mowed by a tenant for a few extra bucks.  Utilities are underground and the asphalt road is in pretty good shape.  My partner is about 1 hour from the property and I am 3-4 hours away.   I am in the area approximately 15 times a year and don't mind coming back more often if needed.  Given that we would be absentee owners, do we need a park manager?  Our plan is to use  a PO Box to collect rent, so for this discussion, assume rent collection is not needed by the park manager.  

If we needed a manager, would free lot rent and $10 per managed lot monthly be considered a fair salary in exchange for park management?  Does anyone have experience with managing a park of this size?  How difficult is it to find a park manager?  We have a vacant lot to offer.   And would we need to include lot utilities in the compensation or should the park manager pay for that?  The location is rural and lot rent is currently at $140.  We believe market rate is around $180 and plan to raise to $160 within the year.   Occupancy is 90%.  Appreciate your thoughts!

Thanks everyone for their input. Sounds like I have to get a better handle of expenses and NOI.

The property is in Ohio, near Columbus.   Anyone familiar with that area?  

The current asking is $365,000.  I think there is room to negotiate as well.  And yes I forgot to include taxes.  The current owner pays $1,070 in taxes.  The taxes would likely go up with the new purchase price (let's use $1,500 for a new number).   The park has some lighting.  After walking the property I think it is in very good shape and is one of the selling points to me.  I am not going to buy any new homes. I will advertise in the Surrounding area and do much of the advertising myself but I should include $300 for an advertising budget.  I plan to do the management myself for the first year with the help of my brother.  I will be processing the rents and doing the books on Excel.  I know it will be some work but I want to learn the process. I will go ahead and add another $4,000 for misc. expenses. 

Adding $1,500 for taxes, $500 for advertising, $500 for lighting repairs, $4,000 for misc expenses, the new NOI is $35,760.

NOI of $35,760 at a .10 cap rate would value the park at $357,600?

I can likely manage a downpayment of $80,000 and possibly $100,000.

Tim,

Thanks for the reply.  What would some of these costs be?  Are they mostly admin type costs or more maintenance related? Right now I am planning for snow removal, tree trimming and road maintenance.   There are no other buildings on the property.  My admin budget of $1,500 assumes some banking fees and accountant fees.   I am not including any fees for an eviction but I am aware they may be needed if I have to evict a tenant.

I should also add that I think the rent is below market. Some parks in the area rent for $180 monthly.  

I have located a mobile home park in a rural area, approximately 45 minutes east of a major city.   My brother and I are looking to go into this together.  He is 45 minutes away from the property and I am 4 hours away.  The property has 33 pads.  They are all on city water, gas, electric and sewer. 27 of these are occupied (renting the dirt/pad only) and the one park owned home is rented for a total of 29 tenants.  Rent is $140 monthly for the pads and $325 monthly for the home that is park owned.  Tenants are required to cut their own lawns and maintain the yards.  The utilities are underground.  The only infrastructure is an ashpalt road that runs through the property in fair shape.  There are a few trees remaining on the property.  The owner developed the park 40 years ago and lives 10 miles down the road. He does the maintenance on the property (mainly snow plowing he says).  Tenants are on a month to month agreement.  If we have expenses of $1,500 yearly for insurance, $4,000 in maintenance (my estimate for hiring someone to do the plowing and salting with some other room for more maintenance costs), monthly rents of $4,105 (or $49,260 yearly), plus an additional $1,500 in administration costs, what is a fair sales price for the property?   There is room to develop 2-3 more pads (with substantial costs for taking trees down and building the pads).  I don't think the owner has advertised any of the vacant pads as he is near retirement and owns the property without any debt.  What should we offer?   Seller financing may be possible but unknown at this point.  Thanks in advance!

Cash Flow: $49,260

Expenses: $7,000 ($1,500+$4,000+$1,500)

NOI: $42,260