What price would you give this Mobile Home Park?

[nccom]

I'm new to mobile home investing.I've done some homework and have an idea on how to value parks but would like to get opinions from you who have more experience.I was hoping to get feedback on what this is worth and what I'm missing?

It's not a pretty park,basically rural and low income.

It has 24 spaces including 24 mobile homes which are park owned free and clear(value $35,000).Currently 19 are rented for an income of $9400 per month.The other five still need some work and permits and need to be put on pads at an estimated cost of $9000 total.The potential income with the five is $11- $12,000 month.

I'd like to use a 40% expense ratio(owner claims much less)

I asked about maintenance issues and he says it could use some landscaping,painting and may have to buy two new septic tanks soon.I'll use $10,000 as an estimate.

Please let me know what price you would put on it assuming a 10% cap rate.

Thanks

[tatertot]

I don't know what the park is worth, but I had an estimate for a new septic system this year and it was $13,000. That's for one tank serving a single two bedroom house.

I think your estimate for 2 septic systems big enough to serve 24 homes is a bit low.

Maybe you could talk to the health department, or whoever is responsible for septic systems in your area before you get too enthusiastic about this park. If it has septic troubles, it might be hard to remedy the problem.

[Rob in Atlanta]

Sounds like a nice deal, if you know how to maximize your investment and minimize your risks.  Just from what you wrote, I would consider the following:

1.  New perk test on soil to accomodate your new septics needed.
2.  Convert the mobile homes from rentals to 'owner financed' sales.
3.  Rent the dirt!
4.  Sell the notes on the mobile home sales to pay off your entire cost.
5.  Incude a provision of the mobile homes cannot be moved until the homes are fully paid.

Now you have no toilets to fix as the homes are sales, you earn rent on the dirt with little maintenance costs, you can raise the rents 5%+ each year, and you have a built in tenant for the dirt for the duration of the mobile home financing terms.

Unencumbered income.........Say YES!!

Regarding 10% cap, if you followed the above, you wouldn't need a cap rate as you would not want to sell unencumber income on dirt!  Regarding the price, I would work this backwards by calculating what price I could sell each owner financed note on the mobile homes at a discount to yield 18%, then calculate what purchase price amount you can afford to pay so that your end result is 'free and clear' dirt and all other costs so you have the unencumered income.

That's one mans opinion!
If you don't want this one, call me, I would most likely buy it!

Hope that helps.