Hi,I’m new to MHP business and just want to verify that it’s a good deal.We are looking at the park in one of the northern states.The park is 52 units, no park owned MH, but there are studios in stick build apartment buildings.Tenants pay for electricity, but water/sewer/garbage is paid by the park and not sub metered.City water and sewer, but the sewer first goes to the septic tanks and then pumps out to the city sewer. Sewer is fixed amount, based on the number of the lots, not usage.Rent was increased in the beginning of JuneOut of this 52 units:23 - MH lots - fully occupied - All rent for $33016 - RV lots - 3 vacant - Rent average $33012 - studios/1br apartments - Rent between $400 and $500 with one remodeled one renting for $7001 - shop, rents for $600, but the renter is leaving.So, gross income for June was $17,915. Based on it yearly gross can be $214,980. Total expenses: $79,786. NOI - $135,194Asking price $950,000 (cap rate 14%)So, if numbers are correct, the deal looks good, though I’m not sure how to evaluate the apartments and the shop.We would like to bill back the utilities, but our concern is that the other parks in the area charge $330 rent with utilities included, some even charge $270 with utilities.Seller wants $250K down and can finance the rest at 8%.Any analysis and suggestions are highly appreciated.
Break it down into pieces, and then add up the pieces.23 MH lots x $330 x 12 x .6 x 10 = $546,480 at a 10% cap rate16 RV lots x $330 x 12 x .6 x 10 = $380,016 less an “RV discount” of from 0% to 100% based on how permanent they are and the demand12 apartments x $400 x 12 x .5 x 10 = $288,000 at a 10% cap rateI would not even place a value on the shop, as there’s no guarantee you can even rent that.That leaves a total value on this deal of $1,214,496. So much for the 14% cap rate concept.If you discount the RVs by 50%, then you’re back to his asking price at a 10% cap rate.The real problem with this deal is that it’s not a mobile home park, but a mixed use MH/RV/APT deal. Very few buyers want those and very few lenders will loan on those.Is the seller carrying the paper full term? If not, you better get a handle on if this is bankable or not. Call Pierce at (585) 423-0230 and get his opinion.I agree that you can’t raise the rent much (if any).
Thank you for your response, Frank!All RV’s there are permanent. Should I discount them by 50% or less?Do you think it will be possible to bill back the utilities?The seller is ok to carry paper full term, but I’ll definitely call Pierce to find out whether it’s bankable to have more options.Does the deal look good for you?