I am looking at buying a mobile home park in Panama City. I would like to know (if there is such a thing) a standard or expected or acceptable % of income the operating expenses should be & also vacancy rate. Thanks.
Are you asking what the expense ratio is to income? If so its 50% for me. The vancancy ratio varies in each market, but I believe a healthy ratio is 20%. Call me out guys if I am wrong.
FEMA has had parks filled in the area due to past storms and generally after 3 years lots of vacancies occur. Check the elevation and past history for storm problems and how close to the Gulf. Every park has different parameters to be aware of and the P & L can be vastly different. Best to figure out YOUR possible P&L from your prior experience.—if this is your first property go very SLOWLY and if the property does not work you will gain confidence and better at doing a visual inspection and completing DD. We know within 60 minutes of visiting a property if we want to close on the business. Generally the first 3 years of ownership your expenses will exceed you laid out plans.
When investing in a mobile home park, a common rule of thumb is for operating expenses to be around 30-40% of income, with a vacancy rate of 5-10%. However, local factors can vary. Research and due diligence are key. Good luck!
Standard is 30% with city/city with few or no POHs.
Add in lots of POHs and that number is 40+% realistically.
Add in POHs + private utilities and you’re at 50% easily
We don’t own in Panama city (watch out for hurricanes) but based on our 40 MHP portfolio we’ve found that private utility parks run at around 40-45% expense ratios and public utility parks run at around 35%. A smaller park (under 39 lots) will likely run 5-10% higher.
With that being said, we have bought MHP’s with expense ratios of up to 60% at the time of acquisition but through analyzing the budget and making cuts on the expenses (usually payroll or utility issues), we typically bring that down significantly in the first few years of ownership. We look to stabilize our properties with an expense ratio around 35%.
Best of luck with the potential MHP acquisition, I hope that you are successful with your venture! Feel free to reach out if you have any questions.