Help evaluating MHP


#1

Hi Guys,
I’m currently looking at
10 TOH, 38 POH, and a 4 unit building.
The TOH bring in 340/month, 38 POH bring in roughly 682/month. and the 4 unit building bring in 650/month.

Assuming I cap the 38 POH at $320/month:12,160
+TOH:3,400
=$15560 *12 *0.65 *10=1.214MM
+
$2600 (apartment rent) * 12 * 0.55 *10= 171k
=1,385MM

How should I value the POH’s and the 4 Unit building?
To add to this FEMA recently remapped the park which was not in a flood zone to flood zone x.

Thanks for all the help in advance.


#2

Flood zone X means no flood insurance is required.


#3

Does that mean the FEMA flood zone is a non issue? or should this be a negotiating point.


#4

Maybe you should contact your bank and ask them if flood insurance will be required with FEMA flood zone X zoning. I’m in south Louisiana and no flood policy is required when it’s flood zone x.


#5

One concern might be why is there so many POH? Is there a market to sell off the homes when you buy the park?

Is the $320 rent at market? Who pays water/sewer?

I agree that Zone “X” is not usually a flood zone.


#6

Good questions:
At first I was not looking for Park with a lot of POH, But as the current owner puts it, he is constantly looking to buy Homes as his repair cost and maintenance is not near what mine or the usual owners would be. He runs a Property management company for more than 25 parks in the area and owns multiple mobile home dealerships etc…
Currently the 10 TOH pay 320 on average.
Park pays water and sewer (city)


#7

Your expense ratio is likely too low considering the park pays water/sewer. You could be looking at 50% or higher, and tenants will use more than normal since they don’t pay for it. Sub-metering could solve the issue so you may want to consider those potential costs/benefits into the equation. Use a higher overall vacancy estimate as you’ll have more turnover in POH than in site rentals.


#8

For the 4 unit, use comps in the area and discount further if it is not on a separate parcel of land.


#9

I’m using the gross income with a 50% expense ratio…
It is on the same parcel


#10

Some more questions:
I am in middle of negotiating the P&S.
The seller took out sole discretion out of the P&S and put in “Reasonable” and said he would not produce bank statements but will provide tax returns solely relating to this park.

I guess my questions is: Should I cut my losses and walk?


#11

Are you still working on this deal?


#12

I walked.
The owners tax returns showed a lot of upkeep (60-70% exp ratio) but after inspecting the POH’s he obviously wasn’t spending a dime there and I figured he was laundering money through the property…
Being that I couldn’t get Bank statements and the seller was being shady the entire time I felt I couldn’t properly vet the income and walked.


#13

Thanks for getting back. I’m just as curious on the deals others walk away from as the ones that work out.