How much should I offer on this MHP? ideas wnted - Posted by Bryan

Posted by ray@lcorn on November 13, 2000 at 11:50:53:

Bryan,

My first step in evaluating any income property is to review the actual operating numbers. Your projected income and expense above may or may not be accurate, and can only truly be determnined after a close examination of the past operating history.

One item that jumps out at me is that the owner is paying electric as well as water expense. That expense, coupled with the weekly rentals, puts this more in the category of a boarding house than a mobile home park. I assume your maintenance expense is supposed to be all encompassing of water/sewer/electric charges, as well as all other expenses of the park. Again, without the real numbers I have know way of knowing whether you are close.

Also, I would double check the insurance coverage and costs. You don’t give the amortization period on the loan, and therefore I have to guess at the amount included for insurance and property tax, and it seems low (

How much should I offer on this MHP? ideas wnted - Posted by Bryan

Posted by Bryan on November 12, 2000 at 12:25:57:

My experience is in single family home rentals and not MHPs. I am looking for ideas from experienced investors that could give me actual realistic numbers and constructive feedback. I have already offered $245,000 with $30,000 down and owner financing $215,000 @10% with a 10 year balloon. The owner was O.K. with this offer. However, I discovered an ordinance after the offer was made which voided the contract. I told the realtor I would make a new offer - this is where I would like to have help. I have good reasons to not rely on any numbers that the owner has provided to me - the MHP seems totally mismanaged. But, I do know the that MHs of this type rent for $80-$90 a week and mobile home parks in this area stay full - there are many factories in the area. I have also talked with a few MHP owners and they all say that finding tenants is NO PROBLEM whatsoever.

Description of park:

  1. 22 MH spaces, 21 MHs, 3 MHs vacant and vandalized.
  2. MHs are all placed on 4.35 acres
  3. MHs age: all are '80-85 models 14x70’s
  4. No ammenities
  5. 2 gravel roads (ordinance states that owner will pave
    350 feet of gravel road in 3 years)
  6. Many tenants have been residents for a long time and are
    "settled in". Some have put up fences and outbuildings.
  7. Owner has been paying electric bill and the water bill
    for all the tenants even though they all have seperate
    meters.
  8. most homes are livable but I think all need improvement.

Here are some numbers I worked out: (see anything wrong? see anything right?)

total pmt (including opportunity cost on my $30,000)= pmt to owner+ taxes and ins. = approx. $2400/mo.

18 MHs @ $90/wk x 4.4 wks = 7,128
–minus 10% vacancy 713


total rents recv’d/mo. $6,415

income after debt expense = $4,053/mo.

In 6 mos. after improvements (vacant MHs rehabed)

22MH x $90 x 4.4 wks = $8,712
— minus 10% vacancy $871


$7,841

total new payment:

Pmt (owner+taxes+ins.+ opp. cost) $2,362

  • rehab costs ($20,000@10.5%)pmt $ 183

$2,545

income after debt expense: $5,296/mo.

Maintenance expense :
$800 per year per MH 22x800 divided by 12 = $1,466


(this $800 is my figure, a MHP handyman told me he thinks this figure is too high - but I’d rather be pessimistic)


my income per month after debt expense and maintenance - $5,296
-1,466


$3,830 per month (this does not take into account mgt. fee)
(I’m happy with this number - it’s more $$ than I’m used to making)

I have on order Ray’s course for MHP and will read it - in the meantime - if any experienced investor could help me with these numbers - it would be greatly appreciated. I will also be getting the help of a lawyer. Also, I expect and the owner expects a lower offer than $245,000 - but what should that number be? - a number that is fair for both parties. I’ve also talked with the town planner and am aware of ordinances (pending or otherwise)

Thank You in advance for your time

Bryan (foothills of NC)