It sounds like a very good deal. However, I would verify the income and expenses. If it is currently being managed and/or maintained by the owner, don’t forget to include an expense allowance for those services. Obviously, the owner will not continue to manage the property without pay after the sale. And, if you manage and/or maintain the park you should be paid a reasonable fee for services while earning a reasonable return on the dollars you invest.
Also, since the income from the mobile homes has a limited life, the income they produce shouldn’t be considered in arriving at the cap rate or value of the park. The value of the homes should be estimated separately.
If you need further help, please call me at (352) 475-1800.
Molbile Home PArk Purchase - Posted by Due Diligent
Posted by Due Diligent on May 16, 2000 at 11:34:28:
I have an opportunity to purchase a MH park. The CAP is 28%, which seems incredibly attractive. Other non-MH income property would be attractive around 12-14% but I do not know what a typical MH park CAP rate should be. I would be grateful to learn from one of you pro’s out there whether I should jump on this or counter offer.
There are 63 spaces on roughly 18 acres, 100% occupied, and 7 MH’s leased by tenants to own.
I just purchased a park with a cap rate of 27% and it has been a very good investment. Y ou could use Ray Alcorn’s course on mobile home parks from this site I just got mine and it is full of good information on due dilligence. He says that he doesn’t look at a property unless it has a minimum cap rate of 12%.
Hope this helps and good luck!
Greg