Re: Mobile Home Park Purchase - Posted by SteveC_GA
Posted by SteveC_GA on December 12, 2000 at 22:31:59:
I purchased an older MH park a few months ago and faced the same questions you are asking. I put a separate value on the lots and did not consider the 8 MH’s that came with the purchase. This park had several rentals in it, including the 8 that came with the purchase.
I viewed this park as two possible sources of income. The first came from the lot rents. The park has 37 lots with owner occupied MH’s and the rest (32) were rentals or vacant lots. Everytime I rent a lot out, an extra $125 per month will be added to the bottom line and almost 8K to the value of the park, depending on what cap. rate you use.
The second source of income is from the sale of MH’s with owner financing. This park is no longer a “rental” park. This forced the landlord’s renting units in the park to remove them or sell them to me. My lot rental income decreased in the short term, but it was a sacrifice that will bloom in the long term. I ended up buying an additional 6 MH’s along with the 8 that came with the park.
Think about it, now I have my own playground of “Lonnie deals” to prosper with. I Don’t have to worry about PM’s anymore.
All of the MH’s I got with the park where early to late 70’s models. All were in bad shape, but definitely repairable. I am systematically rehabbing the MH’s and selling them on notes. I’ve averaged about 3K in fixups and selling them for 10K each, with 1K down.
One last thing about value on the lots. In my area it costs about 10-12K per lot to build a new MH park. Older MH parks have been selling for 6-8K per lot. I ended up purchasing this park for just under 4K per lot. The reason I bring this up is that you must be educated about your local market. Otherwise, you have no basis to judge whether the price on a MH park is justified.
I apoligize for the lengthy response, but hopefully it will help you as you look at this investment.