I want to purchase my first MHP. It’s small (2 trailers, with space to add 2 more). I have it under contract for $45,000, with $2,000 down. Park has a 17.1 -21% cap rate. Where do I get the rest of money prior to closing? I can’t find lenders who will do it for less than 25% down! With a $45,000 investment, it would be a 16%+ ROI. Even with a bank loan at 5.5%, it would still cash flow over $200 per month. I have another trailer to move on that’s located a hundred feet from the lot to move it to. So, there’s upside there. I figure the MHP is worth about $79,000 (using the rule for quick valuation of moving the decimal point on the NOI 1 place to the right —$7,968. Trailers have street lights and the MHP is fenced. Long time tenants. Added benefit is a boat parking spot in an extra driveway for $37 per month, which adds another $444 to the NOI. Ideas on investors or lenders who want market loan rates. End game is add at least one more trailer, raise the NOI and value, then sell in 3-5 years.
I think the problem with this deal is that it does not produce enough net income to interest most investors. The smallest park I ever bought was 15 lots and Dave’s was around 10 lots. At only 2 lots, there just isn’t enough critical mass. The exception would be a park in California in which the lot rent is $1,000 per month. Problems include the lack of diversity (one vacant lot = 50% vacancy), and the fact that one non-paying tenant = 50% uncollected. This park is more like a duplex than a mobile home park – it loses most of the benefits due to its small size. i would pass on it and look for something better.
I have found a 16 unit MHP nearby for $350, all park owned, 2 being cleaned/renovated and 14 rented. NOI is $42,364 and 10 of the units are well under market and could stand an immediate rent raise. Still, where do I find investors?
What’s the lot rent? Is the $350 per month home rent?
The current owner has let most of the leases expire and are now m-t-m. One is Section 8. He does not differentiate between lot rent and trailer rent, which I will correct. The $350 should have been $350K, price for the 16- unit MHP on 9+ acres. Some MHs are $150+ below market. I might need help in how to approach that…raise $25-$50 at a time or what. Elec and water are tenant responsibility.
I’m worried that you are not yet fully educated in the ‘ways of the mobile home park world.’ Please buy Frank & Dave’s books off this website, and please come to the next Bootcamp (L.A. next month). The parks you are talking about buying are screwy. They are either too small (the 2-space park) or too low-density (16 spaces on 9 acres?!?). Once you get educated about the mobile home park business, you’ll be able to see deals more clearly.
As regards fundraising - that’ll need to come from your network of family/friends and building your professional network (try LinkedIn.com) and from ‘crowd funding’ sources like and fundrise.com. But you’ve got a long, long, way to go before you are ready to take other people’s money to buy a park.
Put both of these deals on the way-back burner for two months and get educated about the industry.
My 2 cents worth,
PS - I receive no compensation from anything sold on this website.