I have read several articles on the MHP business. However, I am missing a piece to the puzzle. I am a small investor getting my feet wet, so I found a MHP that I can afford. Its a 6 unit park on 4 acres. I looked into the expenses at 11,210. I question the expenses due to several factors, but I continued on anyways. Lot rent around here is around 160 at neighboring parks. So that would give me 160 x 6 x 12= 11520. Gross profit would only be 310 for the year !!! That doesn’t take into account the mortgage and what uncle same gets. There is no room for error. Actually, its a fast sinking ship. How do investors make this work? Is this a bulk business? If you have less than 18 units, do you rent out the mobile home instead of the lots? I really don’t want to rent out the mobile homes. If I use the 6 x 160 x 60 formula and the customer accepts, it’s still a bad deal!!! What is the second piece of the puzzle? What magic number do you look for in revenue? Do you strive to get 100 a door a year revenue? I added only a 10% variance to my expenses and a 100 a door to my new lot rent figure. With all that into account, I should be charging 271 a lot. If I sell a mobile home on this lot and add lot rent to that, it would be close to what a stick built would be. Worse yet, the lot and mobile home would be higher than apartment rent rates in my area. I have no leverage. How does everyone make this work? What are the other key points in a deal to validate a good investment? What am I missing? Do small park tank due to not being able to complete with large parks?
First things first - you need to order Frank & Dave’s course and read through it entirely. If you are serious about getting into the mhp business, their material is the best. It will answer many of the questions you have posted here.
If you feel comfortable purchasing and operating a park from a distance then, in my opinion, you need to look at parks with 25 lots or bigger. And ones that have at least 200 lot rent or higher. The numbers work much better on parks of that size if you are managing from a distance.
Also, don’t be surprised if the seller’s income and expense figures are way off…or incomplete. This is common with many mhp owners. On our recent park purchase, when looking through P&L’s and tax returns, the income figures were far off from what was initially stated. As in 30% less income than what was stated. When we sorted everything out, it became evident that the occupancy figures were accurate, but the owner was very poor on collecting rent. He never enforced people to pay and never filed an eviction. And so about 1/3 of the tenant base was not paying rent each month. Of course, we are now enforcing rent payment and have filed evictions as necessary, but don’t be surprised if you find some very poor management at the park you are analyzing.
Buy Frank and Dave’s books from this website. Then attend the next Bootcamp.
It will be the best money you ever spent - you’ll get all your questions answered, you’ll get answered questions you don’t even know you have yet, and you’ll find a much better park to buy at a better price.
And I’d add that sometimes, deals are just bad deals. I’ve looked at properties before that I thought had a value of 10% of the asking price. As Frank says, there’s a right number for every deal - it just doesn’t sound like the seller has the right number for the park you are looking at. Don’t get emotionally attached or committed to a property. Let the numbers be the beauty - they teach that at the Boot Camp, too.