I am seeking advice on my first deal. I have already met with the owner and driven the property. Here are the details:
Asking price: $250,000
Lots: 32 (TOH only)
1 house (3bed/2bath)
The property is located of a 4 lane highway 35 minutes away from a small metro area. The town it is in has very little apartments. Low wages and low median house prices. Lot rents currently $100/each. I called around one 8 miles away is at $150 but includes water. Another is POH $550. I figure lot rents should be able to go to atleast $125 if not $150. Currently 28 lots are rented the other 4 pads are empty. House rents for $550. Owner pays business license, liability insurance, property tax and dumpster fee listed below. Property runs on septic (2 homes share 1 septic) and city water. Owner states no lawsuits in the past or present. Owner is willing to owner finance.
$100 x 28 = $2800 + $550 = $3350
Dumpster fee - $190/month
Business license - $8/month
Prop. Tax - $58/month
Liability insurance - $63/month
I have added in for my own numbers
Capex septic - $150/month
Capex other - $100/month
Vacancy - $150/month
Legal - $290/month (not quoted just a guess)
Accounting - $100/month (not quoted just a guess)
Collections - 2% Rev
Anything I missed on this short summary please ask.
One of my main concerns outside of the financials:
The city has a law from 1957 against single wide trailers but the owner does not have a certificate of zoning saying he’s non conforming. It’s a small town so he sees nobody cares.
Please let me know if you have dealt with this zoning issue. Please provide input for additional expenses not listed. Thoughts on raising rents based on the only 2 parks within 10 miles.
Was not aware of any park in the USA with rates at $100 per month.
If rates could be at least $175 maybe; sounds like a very depressed area and thus when you sell who wants to buy???
Looks like a good deal for your first park. You should include repairs & maintenance for the home. # will vary based on size, condition, etc.
I’d learn more about that law from 1957. If it’s true, which seems odd, I’d be concerned. Ask the zoning authorities what your risks are and if they say to not worry about it, have them send you a letter stating that. If you plan on bringing in more homes and you are required to bring in double wides, make sure your lots are large enough for them, including modern set back requirements.
I think your legal fees seem high for a park that small with all TOH. Accounting may be high as well. You should be able to handle the accounting yourself. If you have street lights you should account for electrical fees. You’ll probably have to account for a water fee as well.
I’ve seen parks with lot rent at $100 a few years ago - both were mom and pop owned.
@bricehbishop Sounds good. I would agree with @carl on the low rents. I would go over to bestplaces.net and see what the demographics are on that area. When you say a small metro, what is the population specifically? if you want me to assist you with that, just PM me - glad to help.
Is the number for the property taxes correct - $696/year? You are paying more for dumpsters/year than taxes? Check with city assessor on what the taxes will jump to?
Your main concern is well founded - nobody cares, till the big city investor buys the park!!!
Love to hear how this goes - Congrats on first deal!!
In 1957 the term singlewide didn’t exist - everything was either 8 feet wide or 10 feet wide. It was very uncommon to have zoning ordinances enacted against mobile homes in the 1950’s… Read more about it and keep us posted.
Investors tend to shy away from parks with lot rents that low. You may purchase the park and be happy with the deal and cash flow. But at some point you’ll want to sell and the idea is that it will be more difficult to sell a park in an economically depressed area.
I know you can get excited about buying your first park. But I’d be super careful about this purchase. I haven’t been in the business as long as some, but a good market cures a lot of worries and it sounds like this isn’t a good market. Just my 2 cents.
This has got to be in some rural area or small MSA. If I am wrong then you have a lot of upside and buy it now. However, if I am right you will never get rid of it. Be careful.
Water is billed back to the tenants