Looking to purchase a mobile home park in 20 minutes outside of Raleigh, NC. The property only has 2 vacant lots which should be pretty easy to fill.
Details:
36 total lots - septic & well, but city is laying down pipe to convert to town water and sewer. Electric is paid by tenants, and owner maintains well and septic.
3 single family homes - $2,670 total.
25 lots only rent - $275 per lot
11 POH - $650-$750 each
Gross Income - $202k annual
NOI - $150k annual
This sits on 22 acres of land. - so lots of opportunity to expand and build out more lots, pave the existing lots, increase to market rent about $50 more than current.
I’m looking to offer at $1.2M, but I think I would certainly take this off the market at $1.4M - what are your thoughts? Would love to get a second set of eyes on my numbers.
Gotta check the numbers. NOI looks too high for POH, well, septic and single family park rentals. I wouldn’t count city water/sewer until they open the valves and if they do is it a direct bill to tenants or do you get one big fat bill for everyone. I’d use actual lot rent only and add the whole sale value of the single family homes if you can piece them off and sell them. If you can’t sell the SFH you can cap the income but I’d use a 50% expense ratio. My guess is they are a little rough and have tenants that often skip out on rent.
Is there a list price on it or is this a cold contact?
Based on real property numbers only (not including personal property = the park-owned homes) the NOI is more like $90,504, which would equate to a price of $900,000 at a 10% cap rate, which may be necessary on this deal since it’s not that large and has both private water and sewer. Remember that you can’t just connect septic to city sewer without re-piping the entire park, which would cost a fortune and might even require the addition of a lift station. Meanwhile, you need to factor in any tap fees and the connection cost of converting to city water. You also need to focus on the upside to this property, as you are basically full and the only way to increase NOI is with rent raises. I would not even think about expansion until you talk to the city as my bet is that they will not allow it (and I would be worried about the market if they did).
JasonS - Thank you for your comment. The list price is $1.63M. I’m able to parcel off on my own the 3 single family homes and sell those off separately at a later date, if I’d like. The 2018 and 2017 expenses seem to be about $50-60k…even if I elevate to $70k seems like this isn’t too bad. I looked at the neighborhood and also the park itself, it’s not terrible, everything is skirted, homes are in decent shape, no crazy beat up cars or anything in the neighborhood.
@frankrolfe - great points there, thank you for your reply. I’m sure I can increase the rents about $50 since they are below market. The expansion, I certainly need to reach back out to the city on the expansion, is there any reason why you expect them not to approve the expansion on 22 acres, when there are only 36 lots?