First MH Park Deal - Help w/ analysis - Posted by Brian (IN)

Posted by Branden Bestgen on May 26, 1999 at 11:18:40:

There are several things you need to find out. Why are they selling? Are there are assumable loans available or will the owners carry financing. The cap rate of 12.47% isn’t bad, but I try to shoot for 14% minimum. What’s the condition of the water & sewer lines? Paved streets in good repair? Do their payroll figures include a manager’s salary? You need to find out what kind of headaches you might inherit so you can make your offer low enough to compensate for that. Ex. non-paying tenants, drug-ville, pet problems, etc. Nothing wrong with problems, just make sure you get paid to solve them.

Branden Bestgen

First MH Park Deal - Help w/ analysis - Posted by Brian (IN)

Posted by Brian (IN) on May 26, 1999 at 08:37:11:

This is the first MH park I have looked at. Can anyone tell me if this is good, bad, or need more info. Can anyone suggest a commercial mortgage company or broker or money source in IN that is experience with this type of deal.

The Details:

Asking Price: $800,000
Property Size: 2.19 acres (not expandable)
Total # of sites: 54
Annual GOI: 133,427
Annual Operating Expenses: 33,676
Annual R.E. Taxes: 2,997
Annual Property Insurance: 3,460
Annual Payroll: 3,000
Annual Repairs and Maint.: 9,187
Annual Water, Sewer, Gas, Elec.: 13,696
Annual License/Permit: 150
Contract Services: 1,186
Total Operating Expenses: 33,676
Annual NOI: 99,751
Annual Debt Service: 75,562 (1st and 2nd) Existing
Cash Flow before taxes: 24,189

I drove through and the place is packed wall to wall with trailers. Poor streets and old mobile homes. One Conc. Block building in the middle about 1000sf (maybe used for storage or could be vending, etc.) Very close to shopping and transportation. This park is located near other MH parks in the area that are slightly nicer.

I know I need to find out about the existing rate and terms on the 1st and 2nd but what else do I need to know?

Re: First MH Park Deal - Help w/ analysis - Posted by JohnBoy

Posted by JohnBoy on May 26, 1999 at 15:00:46:

Your missing vacancy factor and deferred maintance. Sounds like he has about 40 MH’s one to many squeezed into this park. The better parks usually average about 5 per acre. You need to account for this when placing a value on it. A 5 star park is considered a good buy at an 11% cap rate. This one doesn’t sound like it would be close to a 1 star park with that many MH’s on 2.19 acres.

You should figure 50% for total expenses on something like this. That gives you a NOI expense of $66,713.50.

At a 14% cap rate that would place a value of $475,000.

This one sounds way over priced. Are any of the MH’s park owned? If they are you need to separate the MH’s owned by the park from the dirt when placing a value on the park. How much are the lot rents?