Ohio MH Park Deal Evaluation for Newbie

Hi Everyone,

I’m new to this forum, but am extremely grateful to Frank & others for their valuable insight…I’m looking to buy my first Mobile Home Park in Northeastern Ohio (where I currently live).

There’s a park available near Mansfield, Ohio. Has 23 pads, 13 are currently occupied (all TOH). Utilities are billed directly to tenants. Net Operating Income is roughly $24k. Lot Rent is around $225 per lot. Seller wants $350k…roughly a 7% Cap Rate…Not sure what market rent is in the area, but I would likely increase rent to $250. Not located in an area where homes are expensive to purchase.

As this is my first potential deal, what is the going rate for Cap Rates for a park of this size? What would you offer based upon these stats? Anything else to look out for? Owner is selling due to poor health / retirement.

Thank you in advance for your help.

Also, how difficult will it be to get financing (we have excellent credit and liquidity)? What are rates typically for recourse debt?

I think the big question is what can you infill homes for?
$2502312=69,000 in revenue.
Multiply by 60% for expenses.
NOI= $41,400.
At a 7 cap it’s $591k in value.

If you buy the park for $350k, and it costs you $30k per home on infill, and on a worst case scenario you can’t sell the homes, your park is worth $590k but your total capitalization is $630k ($350,000+30,000*10). Can you get homes for $10,000 or $20,000? I think that’s the big question but curious what others here think. Theoretically, the homes should have some re-sale value and not be worth zero. But, it is a question to ask in my opinion because what if the next buyer doesn’t give you much, if any, value for the homes. As many on here will try to not give value for the homes if possible.

A local bank should finance that. As the other poster stated it all comes down to your cost to fill those vacant lots. Will they need new pads / driveways / utility lines?
It’s tough to make money at $225 lot rents, but if you can continue raising $20 a month every year it adds up quick.

Also I’m pretty sure OH is a hud state. So your cost of infill will go higher if you need to set the pads up for HUD installation specifications.

Each lot is worth $25,000 ($250 times 12 times .6)/.07.
So if you pay $25,000 all in to get a home sold, you’re all in at approximately $550,000. So at least if you can’t sell the homes, you’re total capitalization is equal to, or close to, your lot value. If you can sell the homes, that’s amazing and hopefully you can get all of your money out of the homes and not have $250,000 tied up in the park.

Ohio is not a HUD state. Mansfield is a brutal market. I’d steer clear

My opinion is a 7 cap is very expensive for a park like this.

$225x13x12=$35,100 Gross Income

I honestly don’t know how you would make any money off the park with just $35k in gross.

I know he’s claiming just $11,000 in expenses but that seems way too low for me.

I guarantee if I bought this park I would have $35,000 a year in expenses and make nothing and if I did make a little something the mortgage would eat that.

Filling lots with used homes is expensive and slow

Curious to what makes this a brutal area?