Deal analysis - MHP

Hi folks,

I have a park under contract near Buffalo, NY (in a good suburb of the city), and I was hoping to get some thoughts on the deal before I spend money on due diligence.


Price: $645,000
39 pads (all singlewide) total and 1 stick built home (in okay condition - not great)
35 pads rented @ $285 per month (4 vacant)
33 trailers are tenant owned; 2 of them are park owned and rented for $250 per month
1 stick built home rented @ $350 per month (long-term tenant)
Public sewer/water
Electric.natural billed directly to tenants; water/sewer billed to park, but invoiced back to residents

Estimated income (excluding trailers): ((35 x $285 x 12) + (350 x 12)) x 0.6 = $74,430

Purchase cap rate: 11%

-This is pretty much the cheapest mobile home park anywhere in the surrounding area. I called a number of competitors parks throughout the area, and the cheapest alternatives were $390 per month, so there is definitely room to bump up rates (note that some of these other parks are much nicer with amenities, but also much more expensive). Almost all of the residents are senior citizens who are retired and on fixed income, and mostly long-term residents. These aren’t wealthy people, but I think there is room for an immediate $30 increase in monthly rent, and then another rent increase in early 2016.
-The park is in an excellent location, right along a transit route with buses, and near all the amenities (hospital, malls, etc…)
-Not having looked at the specifics yet, the park seems to be in very good shape. Two of the residents are retired master electricians and plumbers who have been doing odd jobs on the park on an as-needed basis (~$20 an hour). so I think it’s in decent shape, but you never know.
-Snows like crazy in Buffalo, but only two of the streets within the park are the owner’s responsibility. The streets surrounding the park are all city-owned and city responsibility.

-New York State is not landlord-friendly; not sure how much of an impact this could have, but the owners says he’s had no problems with the few evictions done previously
-Most of the trailers in the park are single-wide 60’ or 48’ dating back to the 1960s or 70s. The owner has bought and sold a few of them in the years he’s owned this (usually from the estates of deceased residents), then sold these to new residents. These all look pretty clean and not dumpy at all, but they are old and it shows in the park.
-The sewer system within the park is linked up to the city utilities, but the lines are owned by the park and are the owner’s responsibility. The water/sewer bill is sub-metered and billed to the park, then charged back to the tenants.

What do you guys think of this deal? I still think $645,000 is a bit at the high end for a park this size, so it’s not a steal, but I do think it’s fairly priced, and it doesn’t seem like an overly complex property to manage. The owner has pretty much delegated management of the park to an off-site manager for $500 a month, and if all goes well, I’ll probably keep him (less headache than doing it myself).

The other big issue is financing. I have enough cash to put down about 35% on the park and the owner will finance $90,000 in a second mortgage, but several of the banks I’ve contacted are not keen on lending on MHPs. Any suggestions for this?


Based on what you’ve presented, I would definitely tie it up under contract and do due diligence on it. As far as price, what he’s asking is pretty reasonable, but the lower you can get, the better. But I would not let it get away over a $10,000 price difference.

I don’t think any of those cons you presented are deal killers.