Certainty versus Uncertainty for new investor

mobile home university
1

I have been lurking on this forum for a while. Two years ago, I looked over some listings for MHP’s in my area, but made my first real estate investment in a duplex that I gut renovated. It worked out well but I am back at the same point as two years ago, looking at MHP listings again. Logically, it makes sense as a good investment, but I lack the certainty that a buyer will appear for a mobile home in the park I buy or that if I turned around a MHP and that there would be a buyer for it.

Basically, I lack the experience you all have.

One of the parks I looked at 2 years ago is still available, a 21 space MHP with 16 occupied and 5 unoccupied spaces. No park owned homes, $290 /month lot rent. Water and sewer are connected to municipal water and sewer. There is one master water meter and nothing is submetered. Built in the 1970’s and I am told that the electric meters have all been replaced within the last 4 years.

The lots are gravel pads and the existing units are single wides. It is a rural park on a main highway and fast food and Walmarts are 5-20 miles away

So using a thumbnail formula of 16 lots X $290/month X 70 = $324,800 as a rough estimate of value, the listing price of $169,000 sounds like a good reason to investigate further. I chatted with the realtor and he presented the seller as willing to do a lease option and that the price was not firm at $169,000. I did not press him further because I wasn’t sure I was serious.

Having refinanced my duplex, my private investor would be pleased to have me reinvest that money for him. So another thought is should I be looking bigger than a 16 lot property with $100,000 (borrowed) as a down payment in a deal where the seller might hold a large second? Should I start small to get over my newbie jitters?

Sorry for the unfocused post, but I would like to see how you all appraise my situation.

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Lester,

Welcome to the forum! First off, I would probably use a smaller ratio that “70” on a smaller park like this. It will depend on who pays water and sewer but I would say you should use a “55” or “60” ratio to figure the estimated value. Even at that though the pricing looks good.

You mention the park is rural but on city water & sewer.

I would look at this deal whereby you get the highest mortgage fromt he seller you can and the longer term (or lease / option) and you use your investor’s money to not only put up the down payment but to fill the other 5 lots. Filling that park should get you to a NOI of close to $40,000 per year

Assuming everything else checks out in diligence I think this looks like a fantastic first time deal. And if you decide to pass on it I would suggest you pass it around to other first time investors on this forum for a referral fee.

Dave Reynolds

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Dave,

Thank you for the welcome and the prompt response. The referral-for-fee option is something I had not thought of, but knowing that that is a possibility, it gives me a safety valve for making something off the deal if I don’t go through with the purchase. I will start bargaining to tie the property up and begin due diligence and see what the numbers are.

Lester44

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Good luck, Lester. It looks like a good deal from the numbers you posted. Also, we have a “Manufactured Home Community Self Inspection Report” in the Loss Control Section of our website. It’s a good tool not only for risk assessment, but also for someone doing due diligence on a park purchase. Feel free to pull it off and use it www.mobileagency.com

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Lester,

Can you keep us posted on this property? If you end up deciding not to go through with the purchase yourself, I would definitely like to talk to you about a referral-for-fee option.