Over 70 pads
25 tenant owned
25 ish rentals
Lot rent 200
City water direct billed but still has a master meter and a bill of approx 300 month. Leak or theft. I don’t know. They can’t find leak.
Streets are old paved roads.
Located in a ok metro with a larger metro 40 miles away of approx 500k
Estimating this park conservatively at a 40% expense ratio, I still come up with a value around 700k.
Are there many other factors that would knock the value down. His p&l statements stink and has an overpriced full time maint man due to health issues.
This park was under contract but buyer needed a p&l for the bank along with a 3 week extension. i guess this is normal and not a good indication the deal will fall through. Too bad for me, it’s only 1.5 hours away from me.
The 25 rentals in a 50 unit park seriously knocks down the value in my opinion. If I was interested in renting homes I would rather own an apartment building of a comparable size. The maintenance costs would be lower with only one roof and one HVAC system to maintain. Maintenance costs overall, due to high number of rentals, will be much higher to the point of no positive cash flow on those homes.
I definitely see them as a temporary liability however id rather have the homes there even if I had to put 1000 in each and give them away for $1 than bring in 25 others
Listen to Greg–to many rentals. The rentals will consume much time and EXPENSE. Why do people keep trying to buy parks with all the rentals?? In 30 years we buy parks without them even when we started and we have done very well.
This one was selling for about 400 and owner would carry 150. I thought it was going to be a bunch of work but the potential seemed great to me. Still learning. Thanks for the feedback.
Louvie, they are out there I did not marry the first girl I dated and really aim high the bad ones seldom change and when you want to sell you will really understand the problems with questionable properties Our first park was a fantastic buy plus the owner give me a REAL education that laid the foundation for all future buys and comparisions.
Having never seen the park, I can only guess at the basics of location, density, etc. but simply based on math you’d be crazy not to tie that up under contract at $400K. Yes, the # of rentals is high for a park of that size, but we’ve bought parks six times larger with 100% rentals and done fine. You will have to convert them all, obviously, to park-owned homes over time, but the reward seems to justify the risk.Now for the bad news. This park is going to be extremely capital intensive. You will need $250K for the down (unless you can get a bank loan which I doubt you can given the details given), plus a budget of at least another $100,000 for getting the homes in a decent enough condition to rent/sell (figure on $4,000 per home at least). That is going to really hurt your return numbers – low leverage and a higher price than you’re thinking ($400K + at least $100K + ?).So deal might be great or might be awful, I can’t say because I’ve never seen it. But if it turns you on, tie it up under contract and do some due diligence on it.
Thanks again for the responses. The other bad news Frank is that by the time I found it, it was already under contract. The owner contacted me today and told me they didn’t close because buyer needed an extension. I’m assuming that’s normal and won’t be a deal breaker. Open door if I could have offered quick closing I imagine. I feel good about the bank and am going to have as much of the financing lined up for the next deal.
I would have used income from to property to aid in the turn around.
So, feel free to rain on my parade because this is the time for constructive criticism but I see a million dollar property in this deal at 65 units and only raising rents by $10.
Frank,I’d appreciate if you could clarify something real quick. You often mention having capital to rehab park owned homes - and did again here - but isn’t it important to make the distinction between vacant poh’s and occupied poh’s instead of treating them all the same?Louvie didn’t specify whether they were vacant or occupied. So if they’re all currently rented by responsible/paying tenants, wouldn’t that swing the $100k+ rehab cost in the opposite direction? I certainly understand they’ll have more maintenance costs over time and you want to get them tenant-owned ASAP; I’m just curious about automatically tacking on a “rehab estimate” for all poh’s.
I saw this thread and some of what I wrote in a thread called “POH is evil?” was related to kg2’s comment. I also agree with Frank and I think Louvie is asking the right questions, so good for you. You have to pull the trigger at some point, and there are warts on every deal. The question is whether you know what you’re going to do about those warts (and/or whether you have seen them all). That is a question to answer to your own satisfaction during DD. But if the numbers make sense at a rough estimation, sign the contract and do your DD. You have to be willing to accept a certain expected return and be comfortable with the risk of getting less than that (and understand your means of addressing or mitigating or influencing that risk).Mobile home “parks” are not something that will give you a lot of headache – you’re renting land, streets, utilities and the like. Maybe you add privacy with fencing and a playground area, because it came that way or because of city code or because of the goodness of your heart. But the “apartment” half of it is a headache and it’s ideal to minimize it.Brandon@Sandell
Ok, when figuring out a cap rate. Do we add a collection loss of 2-5% and or cap replacement budget. Seems hard to hit that .7 mark with all that extra budgeting even with 100 tenant owned homes and city water/sewer. Perhaps it’s because it’s only currently 22 spaces.
originally I was looking at a bigger park that I was told may fall through however now it looks like I will not get a chance on that one.
The smaller park is a bit closer and no POH’s with much better vacancy, just not the same upside. It also has several large dogs that need to be removed.