Mobile Home Park Evaluation

Hi All,

I just entered into a contract couple of days back to buy a 12 lot mobile home park . It is in a city with population of 300000 in California within an hr driving distance of where i live.
Number of lots : 12 ( all lots occupied except one )
Number of brick homes : 2
No homes owned by the park except two brick homes.
Lot Rent per month : $425
Brick homes rent per month : $1050
Total Rent per month : $5725
Private septic tank
Master metered electric and gas
Well water pump
Rent includes water ,sewer and trash; Tenant pay for Electric and Gas
Established in 1950s. Current owner bought it in 1994. Retiring and so selling.
Apprised by County for $450K ( land $375K and the rest for improvements ).
Purchase price is $410K with $2K credit for pest control

In 2-3 years, PG&E plan to upgrade electric and gas lines inside the park. So master metering of these utilities will go away and tenants will be directly billed by them.

This is my first park with private utilities. Can someone help to evaluate this deal ? I already bought Frank’s DD manual but would appreciate second opinion.

OK, you’ve got a lot of items to consider and I don’t know all the details. Here are some things to think about.

  1. Private utilities and small parks are a tough combo, as it costs as much to drill a water well for 12 lots as 100 lots. They also make a park that size fairly difficult to sell or finance. You’ll have to make sure that they are all in perfect order and you will be allowed to make necessary repairs when needed.

  2. Master metered gas and electric are extremely dangerous to own and you have to do so for years until that potential conversion occurs (if it happens at all – we get told that stuff by utility companies frequently and it never pans out).

Now on the good side:

  1. For California, those are pretty decent numbers – much higher potential cap rate than the norm.

  2. It has good occupancy

  3. It’s in California

  4. Did I mention it’s in California

I would follow the Due Diligence Handbook and see where that takes you. Too early to call. Like all parks, it has good and bad elements. But nothing too bad as to kill it day one, and nothing too good to make it impossible to pass up.

Thanks Frank for quick response. I will follow your Due Diligence Handbook as suggested.