MOBILE HOME PARK

[GRINCH]

NEW INVESTOR:

FOUND A MOBILE HOME PARK THAT IS FOR SALE. SELLER WANTS $542,000.00. PARK HAS 30 SITES, WITH ROOM FOR ADDITIONAL 20.
WOULD NEED TO POUR FOUNDATIONS AND BRING IN ALL UTILITIES.
ALSO HAVE TO PAVE A ROADWAY. HAVE NOT CHECKED OUT THE COST FOR THESE ITEMS.

TOTAL ACERAGE IS APPROX. 7 ACRES.

GROSS ANNUAL INCOME: $82,560.00

CAN ANYONE HELP ME OUT WITH DETERMINING WETHER THIS IS TOO MUCH.

I DO KNOW THAT THIS IS ABOUT TWICE THE PRICE FROM WHAT THE SELLER PURCHASED FOR. SELLER OWNED THIS PROPERTY FOR 7 YEARS. MOVING TO FLORIDA.   ALSO, CAN'T GET THE ASKING PRICE OUT OF AN APPRAISAL.

ANY SUGGESTIONS WOULD BE HELPFUL. THANKS

[tedjr]

Howdy Grinch:

I like your picture.

You will need to take a look at the expenses and see how much income you have remaining after you pay for the water, sewer, trash, insurance, grass cutting and other grounds keeping and maintenance to the pool or any buildings. If you can cover the debt service it may be a good way to hold land and build on it later. Just off the top of my head it seems a bit high. There is a rule of thumb for MHP's as far as a decent price per space but I do not know what it is. Other rules of thumb such as ROI return on investment and price times gross income may also be helpful. The 6.56 times gross seems way high. I just sold some apartments for less than 4 times the annual rent and am buying and rehabbing a 30,000 foot commercial building at less than 3.25 times gross potential rent.

[reoconsultants]

I know a guy that has done this in the past and still owns a couple of parks here in Colorado I will ask him his thoughts I personally have owned only 1 mobile home in my life and that was my first house 12 years ago.. Wow it seems like yesterday.. I will let you know soon his thoughts and cost's I know that the water tap is not cheap!!

Couple questions

What is the lot rents of the unit's in there now?

If it is cash flowing that well why are they selling it?

Also is there anyway to offer more and have him pay out to contractors at closing to finish these other 20 spaces?

How hard would it be to get the other 20 spaces rented?

what is the current vacancy rate?

Does each unit have its own physical address?

If so how hard is it going to be to obtain addresses on the 20 new spaces?

[GRINCH]

THANKS FOR THE INPUT.
LOT RENTS GO FROM $130.00 - $330.00

THEY ARE SELLING TO CASH OUT AND MOVE TO FLORIDA

PARK IS FULLY RENTED AT THIS TIME. HAVE NOT CHECKED, OR ASKED ABOUT HOW HARD IT WOULD BE TO RENT OTHER LOTS ONCE THEY ARE READY.

ALL UNITS ARE NUMBERED. THERE IS A BIG MAIL BOX LOCATED IN THE FRONT OF THE PARK. LIKE A ONE STOP FOR THE MAILMAN TO DELIVER.

[mikes1968]

I am just curious as the price seems high without the others in place. This would depend on where it is located as each area costs different. The one thing I would watch for is the restrictions of allowing to increase those 20 new ones being put in. This may have new codes which only allow double wides or worse only new ones. You may not be allowed to hook up water or sewer to these or the perk test says yeah but the septic tanks need to be larger or add clay to the sandy ground whichever. The seller may be cashing out BUT if had 7 years and deciding to go now then why arent these developed is a red flag to me because the positive cashflow from the others and a lower buy in price should have allowed him to do so longtimme ago for increasing revenues.

Vacancy rates? Mobiles in there are they rented or any come with the park? When he bought did it have MH's that were included which he is not disclosing that he is holding a note on that he sold to tenant and you will only be getting the rent for the lot from and he is reaping the benefits of the mobile  he holds a note on through selling a lease option????

Electric in some areas will hook up each lot seperately for free as long a scommittment to that cooperative for a year. Water can be well or county provided or through a coop as well which you may monitor an supply as your own supplier to all the units and have that as a seperate commodity for the park as a saleable asset outside of the park assets. Sewer can be the same if permitted with land usage and area for supplying depending on how much available area is next to the park for future development if any at all. These have something for future development considerations to look at as when you have all 50 up and running you would more than likely expand park or look at other profitable aspects to add to it. Look at the whole picture is my point to this senseless babbling.

Just my2 cents worth and a lot of useless babbling throw in.

[GRINCH]

YOU SAID AN AWFUL LOT OF GOOD THING. IT MIGHT JUST SEEM TO YOU TO BE 2CENTS WORTH, BUT I SEE IT AS A BIG HELP AND AN EYE OPENER. CAN'T THANK YOU ENOUGH.

[commercial lender]

As for the purchase price, it must be relative to expected CAP rates in your area.
Depending on the Annual Expenses of the property, this would be simple to compute.

[money2lend.info]

Have you found your lender yet ?

[GRINCH]

NO SIR. I HAVE NOT FOUND A LENDER.

[Valgolas]

Let me help you in your quest.

First, get "How to Get Rich Helping Others" by Ernest Tew.
I think it may have been re-titled to “How To Make Huge Profits With Mobile Homes And Parks”

http://www.ernesttew.com/


Then get  "Dealmaker's Guide to Mobile Home Parks" by Ray Alcorn

http://www.creonline.com/catalog/b-137.html


(I looked for these titles at this site, but I didn't find them.  Sorry.)

[Chris2006]

Hello, The above picture is funny.
Researching your project should always be done. If you feel that the asking price is too high, then that's where the comps come into play.  

[rose bunjas]

I'm in a similar mode of looking to buy an mobile home park.  The price is too high if the potential buyer thinks it is.  I've considered a park for similar money in California also with 30 spaces.  It has similar gross returns.  First, a lower priced park will usually bring all the problems of lower income rentalling.  If you are looking to make it your primary income, 80K or 90K gross gets widdled away pretty quickly in loan payment, real-estate taxes, insurance, park maintenance and pool maintenance etc.  Usually trash, sewer and electric are net zero items meaning they are redistributed to the tennants with no margins.  Lower priced parks being typically being in lower price neighborhoods, also tend to have many park owned models.  This seems like good bang for the buck, but often they are older and unwanted models that require continuous updating and maintenance.  Older models typically bring down a park's value as people don't want to park their shiny new mobilehome next to a delapidated one.  

If it is going to be your primary income, you may find that there is not much left after expenses.  Financing 300K at 5.25% will eat approximately $20K per year (about 25%).  In California real estate taxes are 1% of the selling cost.  So while many long time owners do OK, a new owner will get hit with another $5400/yr (using your cost).  You can figure $100-150 per year per space park maintenance or minimally $3000.  Insurance is also a killer and for a part of that size figure $4000.  Then add in a few others such as billing, legal, advertising, phone, yard help, plumbing etc.  I'm guessing 35%-40% expense rate if owner managed.   That still leaves you $50k/yr without appreciation and depreciation writeoffs.   And all you have risked is 35% down or about $190K.   Typical cap rate on a mobile home part is under 10% (of purchase price) and ofter hovers around 7%.  I guess the question to be asked is $50K/yr worth the headache and do you enjoy that 100% involved landlord feeling.

[GRINCH]

JUST READ YOUR POSTING. VERY INFORMATIVE. I REALLY APPRECIATE ALL THE FEED BACK THAT I HAVE BEEN GETTING. YOU CAN NEVER GET ENOUGH.

I HAVE CONSIDERED SOME OF THE THINGS THAT YOU HAVE MENTIONED, AND SOME OF THEM ARE ONES THAT DID NOT EVEN COME TO MIND.

THANK YOU FOR THE INFORMATION. I AM TAKING ALL OF THEM SERIOUSLY, AND GIVING THIS WHOLE PROJECT ANOTHER LOOK.