Newbie here and I would love some seasoned advice. I have a mobile home park under contract and am in the process of doing the due diligence. It’s a 48 pad park, with 34 park owned homes, 4 lot rentals and 10 empty pads. Price is $190,000. It’s on county water but septic tanks.
Of the park owned homes, 6 are occupied and averaging about $400 per month rent. The lot rentals range from $200 to $275. At about 20% occupancy, i’ll be able to step into the park and have existing cashflow to cover most of the initial expenses, including the loan. The condition on the other park owned homes range from fair to haul away. I think I can get another 10 homes renovated in short order and get them rented up in 3-5 months. (I’ve had people approach me when i have visited the park and teaser craiglists ads have generated some positive inquires.)
The negatives: The park has gone back to the bank twice in the last 5 years. In doing my due diligence, i’ve come to the conclusion that it’s partly due to poor management (one owner was a long distance away and didn’t have good management on site). The only other problem i’ve been able to identify is septic tank issues. The park has 10 septic tanks – with sometimes 5-6 homes hooked up to them. Too many homes for too few septic tanks. There have been some sewage issues. I plan to service and clean up the septic tanks as soon as i take over. Also, if necessary, I will take some homes off the market so as not to overburden the septic tanks.
There are other parks in the area, and average rents are in the $400-450 range. If my initial analysis is correct and I can service the loan and other overhead costs based on the existing tenant base, I can then underprice the competition with $300 or $350 per month rents to fill up the park, and then eventually try to raise rents.
So here’s the question: What am i missing?