Deal Evaluation - w POHs


#1

Hi Group,

I am looking to purchase my first MHP, but keep coming across parks in my area where owner is capitalizing the POHs. I have made one offer (very low) with no counter through a broker and will make another since it is still listed. Id like to know how you all find a way to make these deals work out. Below is info & my calculations for offer. My goal is to acquire a solid MHP to keep long term. I am not concerned with doing

Lots: 20
Occupied: 18
Avg Lot Rent (Area): $325
Avg POH Rent: $639
Water: City, Tenant Paid
Sewer: City,
Roads: City Owned
Trash: City, LL Pays
With exception of 1 new home, all homes are in poor shape on outside, but occupied on inside.
Owner just increased rent by $50 three months ago.
Most all tenants are long term.

My Max offer:

$300 lot fee * 20 lots * 12 *70% = $560K
POH: $104K (One home is new and valued at $35K)
Final Offer: $664K

Goal would be to increase rents by a small amount, fill in a few vacant lots, use rent credit/21st Mortgage, and sit on it with minimal expenses.

How do you view this offer and what would you do different knowing that Seller is “proud” of his rent with POHs?

Thanks,


#2

Its a good basis to start but based on your explanation as 17 of the 18 homes are poor, you are offering too much for the homes since realistically they are worthless. However, these guys think they own gold and they are often hard to deal with them since math is not their strong suite and it doesn’t have to be since in their eyes they are making good money. In addition, depending on their condition you are going to be stuck with these homes so to me you have to review your planned exit strategy and area. If this park is full of homes in poor condition, chances are the park cant sustain 21st Century Homes. So doubtful you may be able to bring $40,000 homes to place next to a dilapidated home.

You have to keep at it and looking at every deal but chances are, this one is going no where. But at least you are getting a good idea on how to think about these deals.