I’m currently speaking with a park owner about purchasing his park. He is an older gentleman who needs to sell for health reasons. Here are a few things about the park:
76 lots
54 POH (4 vacancies)
22 Vacant lots developed and ready for homes. (Rents to be $650 per month) Would like to fill these with in 2 years. $650 x 22 x 12= $171,600 in annual revenue.
Current homes range from mid 1960’s – 1980’s with a handful of 90’s and up. Mostly all homes have been renovated. Owner has put a lot back into the park the last few years.
City population 30,000+ (10-15 miles from big city)
Newer gas mains, service mains, electrical underground type pedestals, and bringing of all trailers up to current codes. Individual meters on each lot for gas and electric (tenant pays). Electric pedestals are installed on all lots, with electric lines going to Mobile Homes underground for improved esthetics. Aerated sewage lagoon located on SE corner of property treats sewage. EPA permit Approved. Currently excellent results showing that the number of mobile homes could be increased to 100+ units. No large sewage bills – essentially operates at a cost of less than $5,200. per year including testing. Sewage mains run down each street and across the back part of the property. City water. A backup water supply comprised of 4 large wells, 24’ x 24’ well house/storage, magnesium permanganate filter, chlorinator, and storage tanks is available.
Owner asking $1.5m
Last 4 years Average NOI is $161,990.
As of now he has agreed to finance the park with $110k down @6.5% he would like a $7,000 monthly payment. We have not discussed the length of the deal but I would like a minimum of 10 years.
We haven’t negotiated on price yet as we have based everything off the $1.5m asking. I am hoping to pay no more than $1.3m. Also, I went back and reviewed some of our email traffic and the owner will hold for the 10 years that I would like. My concerns are that all the homes are park owned (I would prefer no park owned homes) and also that I do not live near this park. I would be an absentee owner but would visit the park every 3 months for a week or so. Any advice or idea’s would be greatly appreciated.
OK, I’ve just noticed you’ve not provided lot rent, so I still can’t value this thing for you.
But to answer your concerns:
Being an off-site manager is no problem. Not if you know what you are doing. How do you know if you know what you are doing? Come to the Bootcamp, and buy the books offered on this website.
The high number of POHs are also not a problem if you know what you are doing. Don’t overpay for them. Put them on rent-credit plans, and sell them to deserving families.
There are currently 3 homes on lot rent @ $165 a piece. I will be buying the books shortly and hope to attend a boot camp in the near future. This particular deal has come back to me just this week with updated numbers so I would like to take a hard look at it in hopes of making this my first MHP purchase. Having a season MHP investor like yourself to take the time to give me advice is greatly appreciated. Any evaluations would certainly help. Thanks again Jefferson!
The bootcamp and books will help you properly value the MHP. Use the 60x or 70x rule depending on who pays utilities. Then add-in the value of the mobile homes, and that should be your total purchase price.
I can’t stress enough the importance of reading AND attending a bootcamp prior to purchasing your first park.