Help with reviewing a park?

mobile home university
1

Hi everyone, I am looking at a park in Wisconsin that has a lot of positives but some issues that I want to get more comfortable with and see what my risk tolerance should be.

Positives

  1. Built in two phases (2000, 2006)
  2. Decent Occupancy (78%)
  3. Modest # of POHs: 12 out of 47 total units
  4. Rent within market
  5. Electric and Gas paid directly to Utility by residents
  6. Storage units provide additional income stream
  7. Owner planning to install water/sewer meters this summer

Negatives

  1. Private Utilities
  2. Gravel Roads
  3. Mostly gravel pads
  4. Small town, an hour from closest metro

From what I can tell without seeing her financial statements, it looks like this is going to be around an 11% - 12% cap deal all-in (including storage income, home rent, etc.). How concerned should I be about the gravel and private utilities. I’m assuming the water and sewer systems should be in good condition since it’s only a 17 year old park. Anyone have any comments or thoughts?

Thanks!

1 Like
2

Hi @newwisconsinbuyer , what is the lot rent?
How many are there occupied and paying tenants?
what is the asking price?
what are the statistics about the metro? population, vacancy rate, unemployment rate, median house price and household income

3

Rent is $235
47 paying rent (11 POHs, 36 owner-occupied). 60 total spaces, zoned for 100
Home Rent is $600 - $675
Asking is $1.2MM
There are also 32 storage spaces getting $40 a month and it’s 100% occupied.
Small population (1,500 people) but about 45 minutes from Eau Claire
10% vacancy rate in town, unemployment is around the national average, median house price is $110k, household income is low, around $45k. Did a test ad on craigslist on Saturday and have gotten 14 calls

4

14 calls in a few days is not bad at all so it seems like you have decent demand.

I would value the park around the neighborhood of:

235 x 47 x 12 x .6 x 10 = $795k for the MHP dirt (40% operating expenses and 10% cap rate)

11 x 5 = $55k for the POH value (maybe slightly more if the homes are newer and in great shape)

So you are about $850k, ballpark, for the MHP part of the deal.

I don’t know how to value self storage but whatever that is, add to $850k and you will have a decent idea of the total purchase price.

$1.2MM sounds a bit high to me.

5

Don’t assume that water and sewer are good. Do your due diligence. A park that I looked at had inferior pipe put in the ground in the late 00’s. A TV inspection showed that it was almost all collapsed. My $0.02.

6

Thanks for the help everyone!

7

Self storage properties as a stand alone will typically be 100 to 200 points lower on the cap rate than MHP’s. Depending on which direction from Eau Claire, the current rents might be light. Feel free to PM me if you want any more specific insight. On the surface with the information given the price seems a bit high.