Hi all, first post here (well technically second but first thread started). I am negotiating on a park in the midwest in a pretty good Metro area:
Population: 35,000 (+11%)
Income: $38,200
Unemployment: 7.2% (little high)
Housing Costs: $95,000
2 Bedroom Rent: $600
Vacancy: 2.5%
This Metro area is about a 40 minute drive to a major city that some residents commute to.
The park is actually two parks–one larger park inside city limits and one smaller one outside town. Both with municipal water/sewer in the park. The larger park is 47 pads (28 occupied) and the smaller one is 18 pads (12 occupied). There are 11 POH, mostly 2 bedroom, ranging from late 70’s to mid 90’s models, and one 2000 model (all but one are in the bigger park and all but one are currently occupied). Lot rent in both parks is $155/month and includes water/sewer (and this bill ain’t cheap from the P&L statement).
Seller is asking $500k and I made a tentative verbal offer for $450k with the seller carrying back a second for 10% of the purchase. Two local bankers I spoke with said they would do an 80% LTV and would be fine with the seller holding a second. Seller seemed very receptive to this.
There are also some interesting things about this deal, including:
-There are between 20-25 other parks in this town ranging from 20 lot pads all the way up to 100 lots. I have not been able to comp any of them yet–they all appear to be your typical mom and pop operators with no website and barely a phone number on wp.com (and none of the 6 I found numbers for answered and only 3 had voicemail setup)
-There are at least 4 mobile home dealers in town
-Some of the homes are still operating on the well in the park to save costs, but seller claims the plumbing is in place to switch the city water on to all pads except for 1
-The deal includes a vacant house with an attached 4 unit apartment (also vacant and probably in need of renovation). I did not assign any value to this but it is there
-Seller actually seems like a knowledgeable operator, familiar with Frank & Dave and the MHP industry as a whole.
Should I just lock this up at around $450k and try to hash out these details during Due Diligence? If rents are below market, there is tremendous upside here billing back the water/sewer and increasing rents on a park that is already purchased at around a 10 cap (at $450k). What do you think?