MHP selling at 19 cap!! Need Help!! - Posted by Shade

Posted by Ernest Tew on October 09, 2000 at 16:10:51:

The national average for operating expenses in a mobile home park is about 40% of income. However, the averages invlve mostly larger parks which have an office, on-site manager, maintenance person, and in many instances, a swimming pool, clubhouse etc.

With a smaller park that doesn’t have any amenities, the expenses will, of course, be lower. In many small parks, the owner does some or all of the management and maintenance. If you don’t provide an allowance for these services, then of course, expenses will be lower. Keep in mind that the income from a smaller park is also lower.

MHP selling at 19 cap!! Need Help!! - Posted by Shade

Posted by Shade on September 27, 2000 at 01:55:04:

I have been dealing mostly with single family when I saw a mobile home park advertised for $300,000. I found out that the park is 20 pads and fully occupied with older single wide homes. The seller has owned the park since the early 80s and it is free and clear.

Income from pads = 66,620/year

Expenses= $8500

Mobile Decals=$400

NOI= $58,120

Cap Rate=19.37

The agent said that the owner wants to cash out. However, he said none of the local banks will loan on it because the owner only claims $20,000 a year on the park. He did find one bank but they want excellent credit and 25% down. The expenses seem low to me, but all the units are separately metered so the tenants pay everything. The property is 5 acres and has room to expand, but it would have to be totally developed. The property also includes and office buiding. The seller has managed the property himself.

I am going to take a look at this park on Thursday morning and wanted to know some of the things to look for. I was also looking for a way to structure this deal with the least amount of cash down. Any and all advice is appreciated.


Re: MHP selling at 19 cap!! Need Help!! - Posted by Ernest Tew

Posted by Ernest Tew on October 01, 2000 at 16:07:51:

A few observations: A price of $15,000 per space is probably too high unless it is in good condition, in an excellent location and the lot rent is at least $300 per month.

During my 25 years in the park business, I have never seen one that could be operated for 13% of income. The national average is about 40%. Missing from your list of expenses was management. Unless the seller plans to continue to manage the park for free after it is sold, you will need to have an allowance for management. Even if you manage it yourself, you should be paid for the services plus a reasonable return on the money invested.

Please contact me if you would like more help. I can send you a form for gathering the basic information. Once it is filled out you can e-mail it to me and I will give you an evaluation.

Re: MHP selling at 19 cap!! Need Help!! - Posted by Mark (SDCA)

Posted by Mark (SDCA) on October 09, 2000 at 15:43:58:

A few observations. 13% does seem a little light. 40% seems WAY high. Are you talking about a park when you rent MOBILES or where you rent dirt? If I had a park with no park owned mobiles and expenses were 40% of gross, I would be doing something about that, especially if the park was sub-metered like this one.
Management of a park without park owned mobiles should not be a big deal.