Hello everyone, I’m currently an active duty Marine stationed at Bridgeport, CA so capital and time are my biggest hurdles right now. My mother has been managing a MHP in Minnesota for over 7 years. She came to me and let me know that the owners were selling the park she is managing (I told her a few years back to let me know if they ever decided to sell). After getting the financials and running the numbers, it looks like a great deal. As I’m a first time MHP investor, i’m not completely sure where to go from here. Do I need to create an LLC? or can I transfer the MHP from my name to an LLC after owning it for awhile? Any and all advice is greatly appreciated.
Before you get too excited about it, give me the details: 1) # lots 2) # occupied 3) lot rent 4) type of water/sewer 5) who pays for the utilities 6) market comps 7) what they’re asking for it 8) will they carry the financing.
So to answer your questions, Frank.1. 31 lots total2. 29 lots occupied3. Lot rent is $289 - trash included in the lot rent.4. The park is hooked up to city sewer5. The park is pays up to 400 Gal. of water per lot. About $26,000 annually (I’m thinking that I could bill the water back to the tenants).6. The biggest competition for the park right now is another park at the other end of town. The other MHP only rents out the homes, whereas this park I’m looking at has no park owned homes. The other park rents at $600/month($300 lot rent/$300 MH rent) the apartments in the area rent for $600 as well.7. They’re asking for $450,000 with $50,000 down. They will carry the remaining $400,000 @ 6% with a 30 year amortization. They’ve agreed to $2,250/per month with a balloon payment at year 30.8. Expenses (not including the mortgage) are at 50% with utilities being paid by the park and 25%if utilities are being paid by the tenants.Does this look like a winner?
29 x $289 x 12 x .6 x 10 = $603,432. Yeah, that deal is a winner. You’re already at a 13% cap rate, and still have upside in billing back utilities. The seller carry you worked out is outstanding. You should be able to get the expenses from 50% down to 40% with proper management.Congratuations! On to due diligence!Let me know if you have any problems.Just want to point out that your positive cash flow on this deal is around $30,000 per year, on a $50,000 down-payment, which is 60% cash-on-cash yield. Compare that to your local bank CD rate (around here, it’s 1%). If you raise the rent only $10 per year, you’ll gain $3,600 per year in cash flow. In six years or less, you’ll be at 100% cash-on-cash return. That’s the kind of stuff they write investment books about.
Well thats the thing, I’m not sure what the due diligence consists of. Would you be willing to go over that with me real quickly? Below is my email.