Re: MHP… is it worth it? - Posted by Howard
Posted by Howard on October 29, 2003 at 07:14:33:
This sounds like it is worth looking into. I approach it this way. Is the location of the park good enough to fill up if the park was empty? Poor location knocks it out of the box. City water & sewer is almost a must for me. Others can deal with waste treatment plants, wells, etc. For me, there is enough to do without dealing with state environmental agencies, Are the spaces big enough for the newer units that you will want to attract or buy? 5.5 spaces per acre is very good and would be as spacious as most top quality parks. How are the roads? You might have to re-do them. Not a deal breaker, but keep in mind the costs.
Now for the income. Lot rent (not mobile home rent) is the key. The mobiles may be old and not worth keeping, even costing you to move them off. It is hard to attract nice mobiles if you have junky rentals, so you might have to move them all out over a short time. If they are old but well kept, you can sell them against notes (Lonnie deals) and have lot renters who would be more likely to keep the units in good shape. Mobile home renters and mobile home owners do not mix. Some investors don’t mind a rental park, but I don’t want the hassle.
Now expenses. With water and sewer billed to the residents, and the park reasonably full to cover general costs such as management,and no high cost maintenance items such as swimming pool, 30-40% of gross rental should cover costs. Our gold standard is to try to get costs down to 25%.
If you know the market rates for lot rents, you could calculate what the net “could” be and can do some calculations about what rate of return is acceptable, taking into account financing debt service (new mortgage, assumable loan, seller financing).
This is the easy part. You need to envision a way to get from the “here and now” to where you want to be in terms of time, money, effort.
I hope this is a start. Good luck.