Mobile Home Park deal help needed

[srbaum17]

Mobile Home Park deal help needed

I am looking at buying my first mobile home park.  It is 5 acres, 30 spaces all separate electrical meters, no individual water meters.  They currently have only 8 spaces filled at $150 per month.  Owner died and next of kin lives far away.  It is in very clean shape.  There is also a 2200 sq ft 4/2 home on the property that could rent for at least $500 month.  Comp sales for the home would probably be about 75k.

Asking Price $300k.  Owned Free and Clear

·   How do I evaluate this deal?  
·   What kind of expenses can I expect if I were to live in the house and run the park?
·   What creative financing options are there to get in with as little money out of pocket as possible?  (The owner says he will finance 50%.)
·   The park is within city limits.  Should I approach the town about tax abatements?  How do I do this?
·   Should I form and LLC or other form of business?  What are some tax strategies I should use?

Thanks in advance for all responses

Smiley

[tedjr]

Sounds like you may have a free place to live with little down. You should be able to get a 70 to 80 % LTV and let the seller carry a second for the balance of the purchase price. Do the math on your total payments including taxes and insurance. Should be less than $3000 per month. With good on site management you can probably keep 25 spaces rented for $200 per month. Please do a comparison to see if you can get this rent or more. Spaces here are Austin $250 and up. You should be able to collect $4500 to $5000 per month total not including the house. The rent you posted on the house seems low to me too unless you are in a really small town. Of course check the water bills and try to see how much they will be per lot. Check trash disposal too for same number. How are the roads. Is there a pool or any other common areas to maintain. Grass cutting and trees etc come to mind too.

Hope i shed some light on your project

Thank you,

Ted P. Stokely Jr
11505 Sw Oaks
Austin, Texas  78737

512-301-9171 home
512-587-6177 mobile

[srbaum17]

Thank you, Ted.

[StacyKellams]

Smiley,

You don't have enough information to make a decision at this point. What is the NOI (Net Operating Income)? NOI = Total Income - Total Operating Expenses.

Next you'll want to find the Cap rate. NOI / Sales Price = Capitalization Rate (stated as a percentage).

The higher the risk, the higher the cap rate should be. This is high risk due to the vacancy rate.

Don't make projections based on Pro Forma numbers. No "what if" senario's. If the rents are $150 then use those numbers to base your offer on. Don't say "if I can get rents to $200 instead of $150 I can make more money and therefore offer more". That thinking will get you into financial trouble in a hurry. If you do the work to raise the rents you deserve the profit, not the seller.

Based on what you've presented, I don't see a deal here. They're asking WAY too much for this thing, unless those 5 acres are on I-35.

· How do I evaluate this deal?

You value the park based on the stability of the income stream. They've got 8 of 30 spaces filled, that's 26% occupancy. That's not what I'd consider a stable income stream. Why are they running a 74% vacancy rate? Why are rents so low?

· What kind of expenses can I expect if I were to live in the house and run the park?

Those I know who own parks tell me to expect at least 40% expense rate.

· The park is within city limits. Should I approach the town about tax abatements? How do I do this?

You're probably not going to get any abatements. Municipalities don't like Moho parks. It doesn't hurt to ask. What you need to ask about are the zoning ordinances. Will you have to increase lot size, thereby decreasing revenue? etc. etc.

· Should I form and LLC or other form of business?

Yes. I would highly recommend using an entity to hold the park in.