Debating between couple of parks

Debating between mainly two mobile home parks.

The first park:

Has 40 spaces 20 of them have homes and all the homes are owner occupied… no rentals. The other 20 spaces are empty lots. 8 acres total

The lot rent is $135

The second park:

Has 20 spaces all of them are full and all of them are rentals. 20 acres total (possibility of adding more spaces). They are renting the units for $450 each.

The lot rent avg for the area is $240.

City utilities individual service on both parks

Price the same on both parks

Assuming on the first park that the lot rent of $135 is the market lot rent then I would be more attracted to the second deal. If you just gave the homes to the residents the park would be about twice as valuable as the first park based on 20 lots occupied at $240 per month as compared to 20 out of 40 occupied at $135 per month.

It is much easier to sell off units in a park that are there than it is to bring in units to empty lots.

I would prefer to do 10 deals like number 2 over 1 deal like number one.

This is all just based on the limited info that you included in the original post.

Dave Reynolds

yes… that’s what i was thinking also… but just wanted to make sure.

They are asking around 295k with seller financing, which I have to do, since I don’t have the cash.

Is that a good deal?

What kind of terms should I ask for?

With the limited information it would apprear that the numbers would work. I could not say it is a good deal just from this info other than it would meet the first round of numbers test.

On the terms you need to understand what the seller is looking for (what he/she needs) and then see how you can make that work for you. There is no hard and fast line on what terms you should offer. They are all negotiable (rate, term, prepay, early pay discount, etc).

Dave Reynolds

On the tax returns they are grossing little over 60k on the schedule E for 2010 and 2011

However the expenses are 39k for 2010 and 47k for 2011. On the schedule E, repairs account for about 40% of the expenses for both years.

I do understand that they “could” be inflated so the owner can pay less taxes… should I still pursue the park?


You can’t get the entire story from tax returns, as many owners try to understate income to pay less in tax. However, the reverse can also be true, as some owners might try to overstate income to pay more tax but get a bigger sales price [30% of the inflated amount in tax versus 10 x the inflated amount in value at a 10% cap rate].

You need to follow the steps in our Due Diligence Manual to see if you should really buy it – while you have it tied up under contract. No speculation can compete with cold facts.

If the numbers seem to work on the surface – and you like the park – then tie it up and give it a closer look. But don’t make a decision one way or the other based on only the tax returns.

What the seller has given you, however, is a good pitch as to why he should reduce the price or carry the paper, as any bank that sees those returns will be spooked – just the same as it has you spooked.