Evaluating a MHP!

I am considering picking up a small local mobile home park… Small local bank has agreed to finance it for 20% down, 15 year amortization with a floating rate of prime + 1% (current rate would be 5.5%).

Seller originally asking $125,000, but has agreed to lower price of $115,000. There are 7 lots, it is non-conforming and can not be expanded. 6 TOH that bring in $250/mo and 1 POH that brings in $475/mo. Current occupancy is 100%. Estimating expenses as $450/mo (not including P&I). Park is on city water (master metered, not currently submetered), and has a septic system. I check with the city, and the lot is not currently able to be changed to city sewer.

Based on the #s I have run, I’m looking at a 13.84% cap rate and 26.54% cash on cash return. As far as things that could go really wrong - the septic is my #1 concern. They city zoning office said we can swap out for a new mobile home, but the health department will have to inspect and approve the septic for it.

Is there anything really obvious that I am missing? I have ordered the 30 day due diligence package and am just starting out with digging into it. I sincerely appreciate any perspective/insight!

20% down is really good. I would like to see your proforma P&L. Also what about market rents?

I assume it is close enough to you that you can take care of a lot of the issues yourself.

What are your goals? Income? Capital gains? It matters when evaluating deals.

Thank you @Randy_CA! The park is about 45 min away from me. The current owner lives there and is interested in staying on as the manager. My goal is to hold it for income/cash flow. My current portfolio is SFH rentals and I am wanting to diversify. MHP seems like a great way to go! The $250/mo lot rent seems about right for the area; I checked to see what other parks were at and it is similar. 2-3 bedroom apartments are around $900/mo however.

Attempting to attach the Proforma - based income on lot rent only. It’s $1975/mo if you add additional rent from the POH.

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I don’t know. You are taking on a lot of responsibility for only $350 a month. And any hiccup along the way and you will have to go into your backyard and shake that money tree you have growing there.

And you know there will be plenty of hiccups.

That is really Lonnie Deal kind of cash flow. You can get $350/month profit on just one or two mobile homes that you buy smart, clean up and flip. And you don’t have to go $92,000 in debt or worry about septic fields failing. On Saturday I bought a nice looking (on the outside) 1994 2br for $5k. On a Lonnie Deal, after painting over the dark blue interior, you could sell it for $12k or so, with $2k down and $350/month. With your $23k you could get a lot of such deals going – depending where you live.

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I’m a newbie so please overlook my ignorance on the topic. What program did you use to generate the numbers?