Alright, here it goes. My wife and I are a young couple and have been wanting to purchase a mobile home park for a couple years now. After searching in local adds and doing a lot of internet searching for some nearby parks I recently found one in my small neighborhood. There are a total of 18 lots, all city water and sewer. They are all tenant owned. varying from older to newer homes. 2 renters are renting a double lot and are paying $175 ($100 for the lot there trailer is on and 75 extra just for the extra land). 1 lot is completely empty (There was a mistake when setting the trailer adjacent to this lot not leaving enough space to set a trailer on it) I thought if I followed through with purchase I could have it moved at my expense to allow another trailer. 2 more are paying $75 for lot rent. 11 are paying $100 for lot rent. This adds up to be $1600 in monthly income. Like i said this is an extremely small town with a city population of about 500 that is located in West Virginia. Most of the people living there are on fixed incomes like SSI checks a couple of elderly people and 1 young lady that is bad for not paying lot rent (just a 100 bucks), and few other who hold a minimum wage jobs or better. The owner never really enforced rules or regs and has never raised lot rent. The park does need some clean up work but its not terrible. The park is not located in a metropolitan area. Most renters have been there for years. Another park I called on close buy was renting for $125 lot rent and another about 45 mins away in a fast growing metro area was renting for $240.
Owner lives away in Florida and is wanting to sell. Originally she was asking 160,000, I eventually talked her down to 130,000.
I figured a Cap rate of 12.61 %
19200 yearly income
1000 yearly exp (apprx)
/ 130,000 X 100= 12.61 average
Is this something we should follow through with or should we throw some lower offers? I know it would be hard after already offering the 130,000
I would appreciate as much advice on this as possible and your opinions will be greatly valued.