Hi all, I really appreciate all the knowledgeable folks on this forum who contribute their time. Thanks in advance for anyone who doesn't mind to help an aspiring MHP investor out with an evaluation.
I am looking at purchasing my first park. I have looked at probably 100+ deals between MHPStore and Loopnet, and consumed all the free material out there available, and feel pretty comfortable with the process. I want to start with a smaller park within driving distance to me in Washington DC for my first purchase.
I've come across a 23 pad park in Pennsylvania. Asking price is $270k (originally $370k) from a mom n pop seller who own several local businesses and are getting ready to retire. Seller provided the following info:
-18 Lots Currently Occupied (other 5 are completely vacant)
-Current Rent: $165/month, just raised a year ago from much lower (have not comped the other parks in the area yet)
-City Water/Sewer direct billed to tenants (but park is responsible for the infrastructure--all lines were replaced in last 20 years)
-No manager currently onsite (local operation where he collects rents himself)
Reported the following on 2015's tax return for the park (actual income/expenses appear to be baked in with his other businesses and would probably be a bear to sort out):
-Rents Received: $28,280
-Bank Charges: $170
-Pension and Profit Sharing: $12,000 (!)
TOTAL OUTFLOW: $25,704
Landscaping/Snow Removal is part of the Repairs. I am comfortable adding the Pension/Profit Share back to the NOI for a total about about $15k, but that still leaves a very low valuation even at a 9 cap.
I've built pretty good rapport with the seller and told him I could probably offer around $220k in our last conversation based on Frank and Dave's standard formula for a park with direct billed city utilities (18 x 165 x 12 x .7 at an 11 cap = $227k).
Demographics are solid, but not a home run:
-MSA Population 65,000 and growing
-Zip Code Median Income: $42k
-Zip Code Avg House Price: $100k
-Zip Code 2 Bedroom Rent :$630, 3 Bedroom Rent: $840
-Walmart in town
Wow this post has gotten very long. Thanks to anyone who has stuck through it all. I really appreciate your helpful words of wisdom.