Hello MHU Community! Looking for your expertise and guidance on this deal. Please share your thoughts!
*Off Market Price-$1.2M (7.7 ac, Fully Occupied)
*30 Units (23 Units POH) (7 Lot leases)
*23 Units POH - $700 per mo=$16,100
*7 Lot Leases - $375 per mo=$2,625
*Tenant paid utilities
*Total Expenses from Tax Returns: $36,600
*All 30 park spots have their own septic tanks, and were all pumped Summer of 2018.
*The property has 3 wells while only utilizing one well for the park. The other two are well maintained and can be brought online at anytime if needed.
*Dumpster is on site for trash
Park is immaculate shape and needs no repairs currently. POH avg age of 20 years.
Seems like the numbers could work if you can get some value out of the POH. For me , In order to consider this , it would have to be city utilities at the current numbers. I’d also like to know that the market is forward poised and rents would have room to grow over the next 5-10 years and not go sideways.
Thank you for response. The market is poised and has massive growth for the 5-10 year on possible rent raises. Currently seeking financing, any recommendations you may have would be greatly appreciated.
Based on my calculations/valuation you are paying about 15K per home. Will you be able to sell the homes at that value quickly in the market.
I would be lowering the offer based on the financial burden of having to deal with 23 brick and mortar rental units.
Its great if you can get away with paying Zero for the POH or less for having to deal with conversion to TOH.
The reality is that most stuff doesn’t work out these days. So while needing to extract 10 -15k per home on the POH side is not ideal, it may be a function of needing the deal to work out. He also did say its immaculate which is good and may have little to no deferred maintenance or large capex up from needed on roads etc ( do your DD on everything ) .
Also, and more in depth, but the number of lots per acre is low. Thats probably due to the septic requirement. Is it possible to attach onto city utilities? While might not be needed, you have the option , if they were on board, to maybe add spaces onto the park? Not sure if that’s possible here but you have to keep all this hidden value stuff in the back of your head especially in a competitive market ( really any market) .
On the debt side has he had any type of financing on it before? I would first start with any lenders that have loaned on it before, then just start shopping all the local community banks. Seller carry of course if thats an option. I have heard the name of some bank out of i think SC that has done MH in those areas but i dont know what their name is nor any experience with them . I think it was on the Ryan Narus Podcast but maybe not:
Just for fun, here’s another quick and dirty. On a per-lot basis.
$325 home rents, break even on homes hope.
30 lots, full, comes to $40k price per occupied lot.
$375 lot rent times 12 is $4500 per year gross. So you’re proposing to pay $40k for a $375 monthly income stream (less expenses). At 60% gross profit margin that’s $2700 but don’t forget to set aside some reserve. So maybe $2400 profit what 6% return.
If you finance at 4.5% you can leverage that up a little.
If the homes are worth something, that’s good. But they may be an incessant money pit.
If the homes are “worth” 10k on average (BE CAREFUL!) then the park is $970k and about $32k per lot. $2400 divided by $32k is 7.5%. so you could say you’re buying a 7.5% annuity that requires you to juggle 23 rental units worth a quarter million of “dead money.”
My point is even a 7.5% cap rate on “real” numbers is a rare deal in this market. It is a very risky and aggravating way to invest.
Hi Level Up, I’m in the Asheville area and could be an equity and Ops partner (in the right deal of course with a decent MSA). Please let me know if you want to discuss. My email address robert@dovedistributors.com Thanks and good luck! RM