*1st mobile home park* Need Advice

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

  • 1100 taxes

  • 1000 yearly exp (apprx)

  • 703 ins

= 16397

/ 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.

Thanks, Paul

Paul -

I’d not buy this park at any price.

  1. It is in the middle of nowhere. This means it’ll be difficult to infill

  2. It’ll be difficult to find a quality on-site manager

  3. It’ll also be difficult to raise rents

  4. The lack of enforcement of rules by the current owner means you are inheriting a rough tenant base

If I had to buy it…

  1. Your expense estimates are way low. Larger parks operate at a 35% expense load. You better figure a smaller park to be at 50% by the time you factor in your travel and unexpected deferred maintenance. So at best this park will make $10,000 for you. For a smaller park like this, the cap rates are higher. Probably more like 15%+. I recently bid a 25% cap rate at an auction for a larger property across the street from a super Walmart; nobody topped my bid (and the owner decided not to sell for less than a 15% cap, so no deal was consummated). So if I had to purchase this park, I’d consider it at $10,000 / .25 = $40,000.

The owner will probably not sell to you for less than what you’ve offered. Walk away and focus on a higher-quality park.

My 2 cents worth,



Thanks for your response. My wife and I would be managing the park, it is located in the same neighborhood directly next to us. What type of major expense loads would you for-see with this park considering it does have all city water and sewer and the trailers are all tenant owned?

Thanks, Paul

Paul -

I think your expenses might look a lot more like:

Taxes: $1,625 (1.25% of $130,000)

Insurance: $410 ($23/pad/year for GL)

Maintenance: $2,500 (old pipes, W. VA. ‘quality’ construction done back in 1950s - you are almost certainly responsible for the repairs to the utilities on your property. Do you know what the sewer pipe is made of? Do you know how many water leaks have there been over the last year?)

Management: $3,000 ($10/lot/month + free rent)

Advertising: $350 (newspaper ads every other month or so)

Bank fees: $120 ($10/month)

Legal: $500 (evictions, misc. Will vary widely)

Junk removal: $1,000 (move ins and outs always result in refrigerators, couches, etc. left behind)

Garbage: $3,888 ($18/space/month)

Mowing: $600 (varies w. season. May be $0 if your park is ‘all concrete’)

Roads: $500 (accrual for eventual repaving)

Total Expenses: $14,493

So your net from $19,200 annual income (BTW - seems to assume 0% vacancy?), is about $5,000. And we’ve not even allocated/deducted anything for your time to manage the manager, place ads in newspapers, oversee evictions, etc., etc…

I don’t think this park makes much money at all - certainly not enough to justify a $130,000 purchase price. I would not buy it at any price.

Your mileage may vary,