I think your sw valuation is too high. When I bought my MHP I bought them separately for $500 each. One wasn’t worth that, as I ended up paying $1200 to have it junked. Junkers have a negative value.
Once you own the park, it seems to me you’ll have a greater return if you can L/O or L/D mhs instead of renting spaces for $75. They’ll fill faster, too, than as space rentals. Don’t forget to calculate a large vacancy factor (mine has been much higher than expected). Good luck!
I could use some help valueing a mobile home park. I am new, but I will put down everything I have.
Asking $230,000
21 total lots with room for more on 6.5 acres in small town. City utilities paid by individuals.
8 park owned mobiles, 6 rented for total of $2625
Park owned mobiles include:
'92 doublewide
'71 doublewide
'77 SW
2 '80s SWs
3 '90s SWs
7 lots rented (6 vacant) at $75 month: total $545
On site owners residence currently rented for $500 m
1,900 sq. ft 3bed 2bath ranch SF home
Total monthly income $3,670
Expenses are stated at
Taxes $1.742.24
Ins. $3,000
Repairs and maintenence $3,000
Trash service $1,200
Security lighting $60
Total expenses $9002.24
This is a well maintained park with gravel roads. All the homes in the park are well maintained. Rents could be raised to $85 but probably not much higher, this is a small town. One other park in town, but it is much older and a little run down.
Posted by rise2it(VA) on April 18, 2006 at 24:59:05:
How much are your figuring in for yourself? Are you going to have to pay a manager? Does this park have a tenant who is playing manager now?
Is the house deeded on it’s own piece of land? Is it possible (always keep your options open, even if it’s something you don’t want to do NOW) to sell the house to help pay down the park? What is the house and it’s land actually worth?
With that said, your 207K number in your followup post may be getting in the neighborhood, although I’d still want it for less.
Do not underestimate the things ryan said about checking with zoning/etc. - You don’t want these surprises AFTER you own it.
Spend $125 or so on Ray Alcorn’s book. It’ll walk you through the ‘due diligence’ stuff that you need to look at. Luckily, I bought it while I was negotiating on my first small park, and it saved me a ton of money.
Once you figure out your cashflow situation, you’ve got to figure out the financing. 10 years? 15 years? This is going to have an impact on what you actually pay for the park.
Posted by Ryan (NC) on April 17, 2006 at 08:07:56:
Brian,
First things first the seller numbers don’t add up IMHO, if a 1900 sq SFH is renting for $500 a month it’s not likely that the MH’s are averaging $440 a month unless it’s being used as a managers perk. What are YOU 100% sure that you can rent the units for if you had to evict everyone and start over? The expenses also seem to be understated by about 10-15% from what I’ve seen. If you haven’t got Scott and Tony’s “Investing in mobiles with land” that’s where I’d start to help base value, the park seems to me worth taking a closer look at and it might just be the missing vacancy allowance and water (even being paid by the tenants you?re likely to have some cost) that’s shorting the expenses but you need accurate numbers to base things on.
Once you?ve got a price locked down that you know you can make the kind of money you want on the park you need to make sure that the infrastructure is solid and that local zoning will allow the vacant lots to be filled / added and what the requirements are for doing so. If you can use metal-sided homes you can fill them fairly reasonable if on the other hand they require vinyl shingle less than a couple years old you better have some deep pockets or a plan to get the money to finish the job.
Just don’t forget to pay yourself first and not pay for the potential and you’ll do ok, right or wrong my line of thinking is that you are currently looking at a 15 pad park with potential not a 21 pad park with potential. Granted there is enough of an upside to the park to make good money down the road but don’t let them talk you into paying for the right to improve the park (known as work). That being said everyone has his or her own value for an investment, if you’ve got money wasting away in a bank or this is the deal that sets you free it might be a good deal to you at asking price. Just remember you make your money on the buy… and seller carry backs at the right terms can easily offset small differences in price.
Thanks for your comments Ryan,
This is how I was ballparking this park, 13 spaces at $75 each would produce $11,700 yr., the residence $6,000, and putting a value of around $5,000 each for the mobiles. I was putting a value of the lots at about $117,000, the residence at $50,000, and $40,000 for the mobiles for a total of $207,000. Also, there are 7 mobile rented, not 6 as I previously stated, that would avg. them at $375 month, which is avg. for the area. The residence should be about $600 for the area. Thanks, Brian