I am relatively new to the REI scene. A an old school friend of mine’s folks have a mobile home park for sale in a neighboring town that I called and asked about last night. I only mention the relationship because I know him very well and he wouldn’t lie to me about the numbers.
Anyway - here’s the deal: 8 trailers on non conforming residential single family lot. Trailers are owned by seller. Seven are currently rented, one just became vacant and is trashed. He’s looking at a newer trailer to replace it. Past return has been between 35-40k net, 45k gross. The last two years hovered right at 40k (he owns it free and clear). He did the maintenance himself and I don’t expect that is included here. The trailers are in good condition overall. He has updated plumbing and electric and installed underground tornado shelters. I think there is opportunity to increase the rent some. The cheapest trailer is a long term renter who has it at $390/month and the highest is at $525/month average is $480.
Asking price $239,000
Here’s what I get: Down Payment $47,800
Loan amount $191,200
Debt Service: $20,400
Maintenance/Management: $10,000 ???
Net: $8,000 /year or 16% return cash on cash
Here’s why I am asking:
- The price seems too high. Running the numbers for 180k seem much more like what I want to invest in.
- I can’t find any comps for this.
- I am worried about the zoning designation - has anyone dealt with this?
- Is my maintenance number too high? I normally figure 15% for maintenance and management but increased it for the trailers.
Refiguring at 180k gets:
Purchase price 180k
Down Payment 36k
Loan amount 144k
Debt Service: $15,600
Net: $11,400 or 32% cash on cash investment
Does anyone have any input?
Are these trailers nearly new? Trailers depreciate and are treated like regular property like a car. Would you pay $30k per door for any of those trailers on their own? Even if you allow $20k for land value, you’re still looking at $27,500 per door. Seems really high to me. I think you need to get them quite a bit cheaper than this.
If you break value down to three components, the land value, value of roads and utility improvements and the value of the 8 mobile homes and there respective improvements this will give you a general idea of what the actual components are worth. Then you need to weigh the income and potential income relative to what you recieve.
Now as to estimating numbers you need to set up a spread sheet with every cost and expense, IE!
A. All Income
B. Vacancy Factor
C. Adjusted Income
Landlord Paid Utilities
Mobile Home Maintence
Locks & Keys
Man Gold River that was an excellent reply.
Don’t forget the home that has been trashed. If it does need to be replaced removing it will cost several thousand and you will have the loss of revenue (unit rent & lot rent). Trying to save it or rehab it depending the cost might pay off a little better.
Size of park is perfect…Price is too high! Look around and you will find that there are many parks available for sale with high vacancies. I’m buying and it’s working fine. Most parks are worth $10k/pad but I buy for around $3k due to vacancies. Bring in additional homes after you buy (older ones) and owner finance the homes while renting the lots. Make your purchase contracts include they must rent your lot while financed…that gives you a tenant for the dirt for 5+ years. Take the note on the mobile home and sell it to your friends in their IRA’s at 18% yields. Use the proceeds to pay off the dirt. Render yourself with unencumbered income on the dirt and you don’t have any toilets to repair!!
When finished, you have a park worth $10k+ per pad. Wait until someone buys and then your problems will become where you can ‘stash your cash.’
I just purchased one for under $30k, and resold with owner finance to one of the residents for over $100k. Now I have a decision…keep my money in the deal and earn over 25% yield for 30 years or sell the note (1st mortgage) at a discount and cash out…don’t need the cash…so will probably leave it there at a good interest rate for a while.
Call if you want to discuss your deals or need help.
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