Is this off-market deal worth pursuing?

I’ve got an off-market property in Central FL under contract but wanted to get some input before I put too much time into this. Please let me know what you think.

Size: 2.5 acres.

Units: 23 Lots. Fully occupied. All POH.

Additional Structures: 1 2/2 stick built that rents for $950 and 1 fully rented duplex that rents for $650 per unit.

POH Rent: $650-785

Market lot rent is $400-450.

MSA: Lakeland-Winter Have MSA. If you know anything about the area you know it’s booming right now.

Utilities: City water/Septic. Park pays water and trash. There’s definitely room to bring down expenses significantly.

Gross income using POH income is $207k

Net income using POH numbers is $145k

Price: $1,500,000

Terms: Seller financing available: 20 year note, 5 year balloon, 5.5% interest. The kicker is he wants about $1 million in cash and will finance the remaining $500k. A lot of the homes are newer but I’m not sure what kind of terms you could get with a bank for this one.

Any input is appreciated.

Sure, two thoughts:
-The difference between the gross income and net income implies a 30% expense ratio for a park with stick built homes, septic, and all park owned homes. This is likely a drastic understatement of the expenses, and by including a realistic repairs and capital expense budget the net income will be significantly lower than $145k. I would bet there’s almost no chance the seller’s tax returns show a $145k net income.

-That seller financing is terrible. If you could get the park at a reasonable price, you’d likely be better off going to a local bank (and if a local bank won’t give better terms, that should be a big red flag in of itself)

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Are you sure that unit count is correct? $1.5 M for 23 units is crazy talk. There is a park in Lakeland that has been for sale for a long while that is $1.5 M for 44 units. Owner will Seller Finance but its all POH’s and the terms of financing a little better. However, owner doesn’t have to sell so there is no wiggle room. I just don’t like the math of having to take care of all those homes. Here is the link for this listing. https://www.floridamobilehomeparksforsale.com/all-mobile-for-sale/65/65-44-site-mobile-home-park-for-sale-in-lakeland-fl.html

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Here is another one in Lakeland for 20 units. This one has been around for a little while also. https://www.mobilehomeparkstore.com/mobile-home-parks/1142358-happy-hollow-mh-rv-park-for-sale-in-lakeland-fl

@Noel_S agree on the seller finance terms. Would make more sense to just go to a bank.

@WhiteTrashGator I’m sure it’s 23 Mh lots plus a stick built and duplex. He’s getting that price because he’s capping POH income. If it was closer to 1 million it could make sense but not 1.5. Id just like to talk some sense into him before he gets a broker which is his next step if I back out.

As per Noel; expenses are around 50%?? and just look at his 2017 and 2018 tax return and than you will realize this is not a deal.
We just closed on a 65 units park plus a 3+2 home with pool for 1 million. Supper nice park and location in Florida. Most advertised parks as noted by White Trash are ridiculous simply because people are willing and sellers are smiling plus Florida is booming just like in 2007 era and than there was a crash. At 1.5 million the taxes could more than double–in Florida taxes can easily be more than 10% of the expenses!!

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Why is the POH rent spread so thin? Are these really old units? With market lot rent at $400 plus you should be getting some really great POH rent too…or the lot rent is inflated and used as a means to inflate the purchase price, which is easy to say when you are 100% POH.

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@carl How much was rent on the 65 unit park? Agree with you on all other fronts for sure.

@jhutson Market lot rent is 400 and the POHs are going for around 700. That seems in line with what I’ve seen all over the country. I think I’m confused by what you mean when you say they’re thin.

Yea, it’s true that it’s common to see those types of spreads. I should have said that it’s more desirable to have a $300 lot rent with a 3/2 renting for $750 per month. 2.5x is “good” otherwise the market is either just okay or not desirable. And I have this at my park in a town of 750 in an MSA of 50k.

But then again maybe lot rents are finally elevating like Frank predicted and my metric is no longer valid…

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