Very, Very, Very Small Park for first time investor


#1

I am a first time investor and a bit hesitant on investing a lot of money for a big park. I like to start out real small (real small) so I can learn the ropes of this business. I am looking at a 4 unit mobile park in a rather nice area in the northeast. They all are park owned and are being rented for 600 per month each or 2400 per month total, So total gross is 28800 for the year.
The taxes are about 800 bucks per year (less than an acre of land) . Utilities are 5600 per year. Insurance will cost about 1500 per year.
They are asking 100k. for the park. Since they are park owned if I multiply a 60% expense cost of gross it comes out to 11,000 net which is an 11 percent cap. With that being said I don’t want to own these homes. If I sell them to the tenants I think I can rent the lots for 350 each per month totaling 1400 per month or 16800 per year gross. Would I be able to charge the tenants an extra 100 bucks a month for utilities since I own the land. The town said they can’t bill the tenants for water and sewer since I am the land owner!?
If I do charge tennats for water and sewer I believe my cap will come out to be more than 10 percent a year cash on cash. BTW the homes are about 25 years old.
What am I missing here because it seems like a decent investment. City water and sewer.
My wife thinks I’m nuts buying this. She says 10k a yer is not worth h the headache.


#2

Your wife is right. You will be very busy repairing the homes if you want to keep that 10K, and you will need to ask yourself how much your time is ultimately worth.

Many of the operators here - including me - started out with owning or rehabbing a single mobile home, either in a Park already, or on it’s own piece of land, to get familiar with the moving parts on the homes and issues with renting them as POH.

While it’s more and more difficult to find Parks with 75%+ TOH, you have to ensure the numbers will work if you convert them from POH to TOH so that the investment is not a time-suck and this is your last park.

If you simply want a 10% return you can get this with some of the MHP funds passively. Search the forum and you can find out details on these.


#3

Thanks you Jhutson. Based on your advice I am not going to move forward with this deal. I appreciate the insight.


#4

@Mitch - I don’t have much experience in this realm (I’m searching for my first MHP as well), but based off of Frank and Dave’s training, this park seems like too much headache/risk for the potential upside. I’d pass and keep looking.


#5

Thanks I had concerns about that. I don’t need to get calls that the toilet is leaking or the door fell off the hinge when I’m 2 hours away. Tried calling a few property management companies and they don’t seem enthused about this as well. Not enough revenue for them.