I have spent the last couple of days doing some market research in regards to pricing of homes, lots, and the whole nine yards. In the process, I came across a MHP for sale .
A good portion of information was provided so my first attempt was just use it as a way to practice evaluating information. As I was plugging away the numbers and going through my “Huge Profits” manual, a little light bulb went off. Hey, this could be yours…
So here is what I know, what I’ve researched, and where I need help.
It’s a 40-odd space MHP in middle GA in a small size city. The town is roughly 20k in population and has about 30 employers that employ 50+ of which most employ at least 200 persons. Median/Per Capita income is around $30k annually. Median House Value is $83k and 2004 there was a spike in # of houses built. Roughly 20% of citizens live below the poverty line, part of that number makes up of families with children and then the elderly. There is a little of 5k houses in the town of which have are owner occupied and the other are rented. Vacant houses median price is $63k and rents are $322 [these figures are based off of 6 yr old rsrch]. Further research shows the largest occupancy occurs at rent levels between $250 and $550; within $50 increments, the level of occupancy starts about a level of 220 person’s peaks at near 400 and levels at 200 persons.
The park is very old and grandfathered in. There is no specific start date according to the contact. Any one particular lot cannot fit a home larger than a small double wide. The current owner paved the roads and put in a new sewage system recently. Reason to sell was not disclosed nor would the realtor divulge.
The park has an office and the owner acted as the manager. On the grounds includes an eating area and small recreational area as well as a storage facility (no information on what type of facility). Park is approved for low-income housing. The park owns 3 homes. One is a 3b/2b lease to own with 4 years left on lease @ $500/mo. Two other homes are 2b/1b lease to own @ a rate of $200/no unoccupied.
Insurance for 3 homes average $150
Maintenance $100/mo I found that low so I doubled it to $200/mo
Taxes $100/mo per home
Pricing is at 6,000 per lot or 260,000
Now this place has two different figures for lot rent [I found a different advert that is used for another purpose] I took a median rent between the two figures
The 60/30 gives me 126,750 (occupied) + 146,250 (dirt) = $273,000
Scheduled Income [current/if fully occupied]
Lots Valued $2112.50 / $83850
Less 10% Vacancy ($211.25) / ($8385)
Gross Eff. Income $1902.25 / 75465
Less 40% Operating Expense ($760.40) / ($30186)
NOI 1140.75 / $45279
Estimate Value of Park (10% Cap) $11407.50 / $452,790
Level I - The Plan
The area is home to a hospital, college, and several other “good” employers. The area also has a population of families “just getting by”. Now one approach could be to clean up the park (year 1), starting bringing in nice MH (during year 1-3), and plan by year 6 to be at 100% occupancy. Also offer discounts on lot rent to those who bring in their own homes. [Idea: people will move to an area they see growing].
The other approach is to cater to those just making it and bring in the “Lonnie’s” for the good 'nuff deal. Risks are including undervaluing property by not being able to achieve best rents. Other concerns are damage to the homes and property by type of lessee brought into the community.
The unknowns include whom to obtain the homes from and how they will be purchased. Additional unknowns include the price to tear down, remove, move, and setup mobiles in the area. I forgot to ask the realtor the question; however, they did not seem very knowledgeable about the property. The property owner will not talk with anyone.
Level II - The Finances
The owner will only consider owner financing a VERY small amount $30k. However, that is decent leverage of the asking price; now we are at the $220k level.
The network, well this is my only affiliation in regards to a network. I have okay FICOS and the possibility of obtaining HML or bank funds likely is possible but I have some preference adding a knowledgeable third-party as this is not my expertise. The drive in me says go at it alone; the sensibility says get help if it can be acquired!
Back to the money, the idea of doing the owner finance at $30k drops the price down to $220k. I could consider the option of using a HML for a down payment for my share. I still think I would need a third party because monies are still needed to improve the property, bring in homes, and etc.
If the deal is good, which I think is will be good after some negotiations on the price. As I expressed before, I personally have low cash reserves, but an okay FICO, and a will and hard work ethic (planning for the last two to increase the appearance of the first two).
MHP says that the price is too high and the seller motivation was medium. However, it’s evaluation of the value was above the seller’s asking price.
Level III - Management
The owner acted as park manager. I am not familiar with the city but live within a drives distance; less than 2 hours. My original plan was to work at least for another year or until enough investments justified the ability to leave. Now, I could easily bring someone in on favorable terms to act in my place and drive up as often as possible/needed. It appears to be cheaper to bring on additional body than to have to need income from the park to survive personally.
I know I am a newbie but I am very serious in regards to my interest. I appreciate any insight that one may share; additionally, anyone who may want to partner in the project or offer referrals to a source of financing this park.
Certainly the project is very large and I’m aware it’s going to be a lengthy ride to the top, but as we speak I am still looking at other perspectives (MHs) as we speak.
I should be able to to visiting the park within the next 10 days. So I will use feedback provided from here to use as a basis of “what to look for”.