A broker has brought me a deal regarding a MHP in Cincinnati. The park is actually located within Cincinnati, and is about an 8 min drive to downtown. It is located in a B-type township of Cincinnati.
The previous owner defaulted on the loan and hence the bank took it over and is looking to sell the park. Consists of 18 lots. It also has a duplex (split between a 3 BD/2BA and an office). There are 11 abandoned mobile homes on the property that are of 1960 and 1970 models. All windows and doors to these homes have been boarded up by the bank when they took over the park. Exteriors of the abandoned homes are in fair-average condition. Interior conditions are unknown. All homes have been completely vacant for the last year. City water and sewer. The MHP was âbuiltâ in 1920. Paved roads. Bank asking for $260,000.
Market lot rent is $430-$490. Market rentals is $650-$730.
If I proceed with this, I know it would be very capital intensive to rehab the existing homes. At least 2 of them would probably have to be hauled away. I checked with the assessors office, and all of them have taxes that would need to be paid from the 2018 year (avg owed on each home is about $830). In addition, I am assuming electrical to each home needs to be upgraded.
The main reason I am considering this is because of the excellent location of this park and demand for the affordable housing would be there once the park is up and running. This would be my first MHP deal, but I own 3 other multi family properties that have been cash flowing well for years. What are the forumâs thoughts on this potential deal, assuming the risk/reward ratio involved?
Maybe not the best metro, but certainly not the worst.
A better way to address this MHP opportunityâŠis it worth it to take on this turn-around Park?
I am aware of how much money and time it would take to address home renovations, infrastructure and lot infill of new homes ($180,000-$250,000 just being realistic). Or am I better off passing on this deal?
Declining markets get little market appreciation. Long term you want to be raising lot rents, not competing with other parks to lower them.
While the lot rents seem good, the spread compared to the home rent is not good. I would expect $1000 per month home rent + lot rent to make this more attractive and help justify the infill.
A park built in the 1920âs will have a lot of skeletons in the closet, and unforeseen infrastructure issues like the electric you already mentioned.
Your infill will probably be closer to 400K for 18 homes, and thatâs an optimistic number.
Seems like a lot of capital investment for a park that wouldnât be worth much more than that when finished. Unless I could defer a lot of the cost of upgrading through the use of 21st mortgage for home replacement and maybe the selling bank giving some very good financing terms Iâd personally have to pass.
Best of luck what ever you decide!
According to Best Places the âcityâ of Cincinnati has a population of 298k with a declining population of 18%. The âmetroâ of Cincinnati has a population of 2.1M with an increasing population of 18%. If you are looking at the metro, it has positive attributes. With that many people I wouldnât be concerned about filling the park however your clientele may be sketchy. If you want to move forward, crunch the numbers and come up with an offering price that you are comfortable with and make an offer. The bank wants nothing to do with this park and will likely take anything for it because itâs a headache for them. Tell the bank that the homes are trashed, there are back taxes owed on them, the infrastructure is old and all you can offer is $150k (or more or less depending on your comfort level)⊠or $175k if they finance; you can likely dictate the terms. You may be able to buy the park, close it and sell the land and make a profit.
Iâd learn as much as I can about the park. A park that old may have horrible infrastructure or, and Iâve experienced this, the infrastructure may have been replaced by now. Call the health dept/city inspector to see what complaints have been filed. Iâd even try to call the previous owner and pick his brain.
Market lot rent relative to apartment rent seems excessively high. Market rent should be less than half the rent of an equivalent unit you bring in. IMO youâll have to be getting 750++ renting a unit (and if you want to do it right, youâre probably going to have to get renters to refill your park initially, because MH are notoriously hard to finance).
To fill will cost $40k plus per home (new). Used is harder to source and rehab can kill you.
If the between home spacing is too tight (canât replace units), youâll have to continually rehab.
Since the park was âbuiltâ in the 20s, I would be concerned about the lot sizes since older mobile homes were not nearly as big as contemporary mobile homes.
The last thing you would want to worry about is merging lots together because they arenât large enough for modern 16x80 ft homes or finding out that you canât place modern homes because they donât abide by cityâs zoning with regards to minimum setback.
Since these homes are 60s-70s homes, I would want to know how many of these homes are pre or post-HUD or whether it is even conceivable for these homes to pass the stateâs minimum habitability laws.
Also, I would be concerned about the internal condition of the homes themselves as well as any age requirements the municipality may have with regards to mobile homes.
It could very well be possible that
a) all of the mobile homes are in total disrepair and beyond salvation - which may result in you paying X amount for 18 vacant lots. As stated through this thread, bringing in homes can be quite a capital intensive exercise and not exactly an easy process given the immense amount of coordination, marketing and selling involved.
b) It could also be possible that the city may have a rule stating that mobile home parks can only have accommodate homes that were built post-1976 which may sour the deal.
Cincinnati is a great metro to own a park in. It is a midwestern town with plenty of growth and stable employment that MHPâs are very well positioned in this market. Donât let the downtown metrics of Cincinnati proper sway you. The submarket is more important that downtown proper.
I am from Cincinnati, lived there for the past 28 years, and have firsthand experience with all the parks in this area.
First and Foremost âZONINGâ make sure the park is acceptable and allowed to continue its use status as a Park under the local government/s.
Many Parks/Lots lose there zoning status after utilities are off or business license not current.
Due diligence is incumbent on the buyer not the seller. TRUST BUT VERIFY
GOOD LUCK.
