Want to get your opinions on a lot in a town of 10,000 people. Stable population. avg 2bed rents for $75084 lots, 75 occupied @ lot rent $200 Average lot rent in town is $225
park has two phases to it. phase 1 (occupied) has paved roads and well, lagoons Phase 2 (unoccupied) 76-82 lot ptential has gravel road with 75% infrastructure in place including well/septic/electric and necessary paperwork. Needs pads and plumbing from T’s in road.park is on 26 acresI understand the empty lot doesn’t have much value but what can I expect to spend to get this occupied?seller financingsale price $1.25 milliondown payment 200k 6% interest 15 yr amort, 10 yr balloonseller wants 9k/month in payments for termThis makes any income on this park low in my estimationtrailers are 70’s, 80’s operating expenses by seller listed at 15% seems low.going with 30% based on info gathered on this forumThis would be first park, I make a living renting a couple duplexes in town where I live.Park is about 5 hours from me.thanks for the help!
It was sounding OK until I got to the “lagoon” and “well” item. No way I would buy a park with well and lagoon as my first park. If that was not enough of a killer, the “park development” concept is a killer – you’ll need $25,000 or so per pad to fill them with homes and the market does not sound like it would justify that level of risk.If if were me, I’d move on to the next deal.
Contacted seller and said city water is available as a back up but well is currently cheaper as homes are not metered separately.The 2 lots can be split so an option is just the developed lot at $1,000,000Thoughts?Thanks for the quick input.
The lagoon is the big problem here. No way I would by this park with a lagoon. Unless there is city sewer nearby that you can connect to, and you have that figure built into the price of the park, then this park is way too risky.
Sorry for the confusion it turns out its not lagoons after all.
I assumed incorectly by viewing a map based satellite view that the Lagoon belongs to mobile home park. But instead they belong to the KOA campground next door.
So its got some type of septic system.
The owner is ill and info from the wife is incomplete.
She does say money was put into the septic 3 years ago.
Not sure a septic tank is any better then lagoons though?
My gut instinct tells me that this park is in a rural area, since it has an expansion with a gravel road and a KOA with lagoon next door, which you never see in an urban area. What do you find compelling about this deal? The location is not impressive (based on my gut instinct), the utilities are lousy, and the price is high. So why are you interested in it? Is there something about it that I’m missing?
The numbers look good to me but again im new to mobile parks. Here is what i see.The park is 10 minutes to town. The 5 other parks in the area have no vacancy.
At 180k gross income @ 1mil asking price, 135k net I figure 12 -14% cap rate.
Or am I out of my mind?
75 lots x $200 lot rent x 12 x .6 x 10 = $1,080,000 value at a 10% cap rate. Add in that the rents are just about at market and that the park is on well and septic, and I’m not seeing the attraction. If the park was at a 14% cap rate, the price would have to be $771,000. At that cap rate, and seller carry with a 10 year term, it might be attractive, but only if the private water and sewer checked out. But the only person getting a good deal at $1 million is the seller – hes having a VERY good day.The standard operating expense for a mobile home park is 30% if the tenants pay their own water and sewer, and 40% if the park pays. You were correct on the revenue at $180,000, but no way a park like this can hit 20% expense ratio (to do that, all utilities would have to be directly billed by the provider, and the roads owned by the city, and 100% city water and sewer). I think that’s what got you thinking the deal had a 12% to 14% cap rate.But when I first started looking at deals, I didn’t even know what a cap rate was, or what private utilities are – so you’re WAY ahead of me when I started looking at parks.Just trying to keep you out of trouble.
Thanks Frank,
I’m loving it and feel like I’ve learned a whole lot here.
I’m going to shoot for a 14% cap with this one and see what the seller is open to.
Ok let’s say I installed seperate water meters and bill tenants for water and raise rent $25/month to match going rate.
What are your thoughts?
If you can buy it at a 14% cap rate, then raise the rent $25 per month, then you’re getting somewhere. You can’t bill back well water in most states, so that options is probably not on the table. To buy this park, even at a 14%+ cap rate, you will have to be an expert on your well and sewer systems and be 100% satisfied that you are prepared for the worst-case scenario.
Here in NM you can bill back water fyi.
Just got off the phone with my business partner and he said park needs loads of TLC and there are only 66 occupied lots.
Your initial impression was correct.
Time to move on or low ball offer.
Thank you and must say I’ve gained an education from this forum.
Fred, it sounds like you’re making a wise decision re this park in moving on… I live in Albuquerque, NM and thought that this sounded like the one for sale in a small neighboring town. Unless you can buy it at a super low entry price, I’d say move on. The ‘rented’ numbers listed on the ‘for sale’ advertisement weren’t accurate when I looked at it either. In talking with the owner, he made a lot of claims that didn’t seem to add up. On the web the park comes up in a lot of areas as 'closed, and I never could get anybody to answer the ‘manager’s’ phone number listed for the park. Might possibly be a winner if you could get it cheap enough but the many negative dynamics of the town it’s in plus the condition of the park don’t add up for the money being asked. Best of luck to ya in your search!
SRN yes sounds like the same park. Thanks and good luck in your search.