I am considering picking up a small local mobile home park… Small local bank has agreed to finance it for 20% down, 15 year amortization with a floating rate of prime + 1% (current rate would be 5.5%).
Seller originally asking $125,000, but has agreed to lower price of $115,000. There are 7 lots, it is non-conforming and can not be expanded. 6 TOH that bring in $250/mo and 1 POH that brings in $475/mo. Current occupancy is 100%. Estimating expenses as $450/mo (not including P&I). Park is on city water (master metered, not currently submetered), and has a septic system. I check with the city, and the lot is not currently able to be changed to city sewer.
Based on the #s I have run, I’m looking at a 13.84% cap rate and 26.54% cash on cash return. As far as things that could go really wrong - the septic is my #1 concern. They city zoning office said we can swap out for a new mobile home, but the health department will have to inspect and approve the septic for it.
Is there anything really obvious that I am missing? I have ordered the 30 day due diligence package and am just starting out with digging into it. I sincerely appreciate any perspective/insight!