Trailer park profit margins
Is anyone here familiar with trailer parks? Just wanted to hear your thoughts on this property type. It seems so much simpler than other types of multifamily. 

Specifically I wanted to know if there is a rule of thumb when estimating expenses to run a park. So for example if you have a 100 lots that rent for $250 you would gross $25,000 a month. Tenants are billed water, sewer, and trash. How much would you estimate NOI to be on a property like this?
[{"id": "cz3kai4", "text": "Depends on location, current occupancy, land lease or purchase costs. I know that often in trailer parks the person buys the trailer and pays fees to the park. Not sure if that's standard but I think it is.", "replies": [{"id": "cz3w6i0", "text": "There are 3 types of parks. \n\n1 You can own the land and lease the \"Pad\" for like 200-400/month\n\n2 you can own the land and the trailer and rent it out. Usually this geared toward super low income people.\n\n3 you can own the land and rent it out like a RV destination - Daily or Weekly.", "replies": [], "depth": 2}], "depth": 1}, {"id": "cz3o8yk", "text": "I invested in one, but don't operate it.  All I know is it's giving me 10% return on my money.", "replies": [], "depth": 1}, {"id": "cz3q05t", "text": "I do not own a park not have I ever. I do plan to purchase one in the next 1-2 years though. \n\nAs for calculating NOI, of course it will depend a lot on your location, quality, size, etc. but I have heard a general rule of thumb is that NOI is 65-70% of your gross for tenant owned mobiles and if the park owns the home you will be closer to 50%. \n\nThere is a new podcast on iTunes by park street partners I just started listening to and it's been good so far. \n\nI think they are an awesome, undervalued sub asset class and they have a lot of potential due to less demand, less maintenance, and the tendency to be sold at higher cap rates due to their undesirability. ", "replies": [{"id": "cz4bk29", "text": "Thanks, the 65-70% figure was exactly what I was looking for. Obviously theres alot of factors that go into it but I just wanted a quick way to do back of a napkin estimation when evaluating a deal to see if its even worth pursuing or not. ", "replies": [], "depth": 2}], "depth": 1}, {"id": "cz40qjw", "text": "If you are calling them \"trailer parks,\" then you have not yet learned the industry.  They are \"Mobile Home Parks\" to those in the business.\n\nOperations are different and more challenging than running an apartment complex.  Eviction for non-payment can be much more difficult since tenants who cannot afford rent likewise cannot afford to move their Mobile Home *even if they had some place to move it TO*.  Security deposit accordingly should be much higher, to cover the cost of moving/storing the home -- but a high security deposit excludes most of your target demographic.\n\nPlus, a disgruntled tenant can screw up your whole park by, say, flushing a bag of kitty litter down the toilet.  Just think about what that can do to the entire sewer system for your park.\n\nThey can obviously be profitable, but do your homework first.", "replies": [{"id": "cz47236", "text": "Trailer court, mobile home park, manufactured housing community, RV resort. The name depends on the kind of dwelling to which the park caters. \n\nI would say management is *less* than that of an apartment building, because turnover is much more sporadic and maintenance is much less of a headache. \n\nI would also advise *against* security deposits. They are more hassle than they are worth when leases are month-to-month and tenants are usually there for 3+ cycles of rent increases. \n\nHomes that are vacated, left on the property, and don't have a storage agreement can be declared legally abandoned, repossessed, and sold by the park. \n\nTo OP's question, yield varies drastically depending on the quality and demographics of the park. A seniors only park of newer construction in a major metro area can sell at a 5 cap, whereas a back woods vintage park on septic could be at a 10+ cap, even with next to no vacancy. \n\nEDIT: Specifically, on a 100 space park at $250 per month and expenses of 25-40% of revenue, you're looking at NOI of 150,000 - 187,000 assuming it is fully occupied. For a park of that size though, it would have to be *really* bad to be charging $250/month.\nOn the west coast for a decent park with 100 units, more realistic numbers would be $450/month rent, .35 expense-to-income ratio, and 2.x % vacancy, you're looking at an NOI of around $342,225 and a price of $4.75 million.\n\nCurrently, there are significant value-add opportunities that are pushing competition among buyers, even for older parks. These include utility pass-through projects (sub-metering) and aggressive rent hikes to match the heightened demand for affordable housing. \n\nBackground: I exclusively broker MHP/MHCs in the NW. I'm also the on-site manger of a 50+ unit park.", "replies": [{"id": "cz48biv", "text": "Law regarding abandonment, repo and eviction will vary by jurisdiction.  Your experience does not necessarily translate to OP's jurisdiction -- but it might!", "replies": [], "depth": 3}, {"id": "cz4ccl6", "text": "Thanks for the reply. I appreciate the really interesting insight you provided. \n\nIm in the midwest so the rents are probably less than the west coast. I am going to have to do some more research though. If there is an opportunity to push rents up closer to $300-$350 than some of the deals I have seen start looking a whole lot better on paper at least.\n\nDo you have any advice on how to spot undervalued properties? Just things to look for that indicate a property that has a lot of potential with some tlc vs one that would just be a bad investment?", "replies": [], "depth": 3}], "depth": 2}, {"id": "cz4bzcc", "text": "I am a complete newbie to the industry so not proficient with the terminology.\n\nGood points about evictions. I can see how it would be a hassle but I guess that could be a nice trade-off for long term tenants. It seems like the same logic can be applied to other side of the coin too. Since most mobile home park residents are low income they probably can't afford to move their trailers on a whim. And really what is out there that is cheaper than a $250-300 pad rent for a mobile home. Thats low enough to easily be paid on a fixed income like social security. After that it seems like your only option is homelessness. But still knowing the logistics of evicting in a mobile home park is something I would need to do before getting into it.", "replies": [], "depth": 2}], "depth": 1}, {"id": "cz5ky0o", "text": "I am a RE Accountant (so I'm not as qualified as some others on this sub), but I have done some consulting for a LL who specialized in Mobile Home Parks. \n\nI don't really have a solution for you, but I want to ask the obvious question: You can usually estimate the NOI by looking at prior years' performance, can't you?\n\nTake a look at some of the listings at http://www.mobilehomeparkstore.com/mobile-home-parks-for-sale and a lot of the listings will be upfront about the noi, cap rate, etc.\n\nAnyway, one takeaway I had from working with that guy was he was under the impression that land zoned for mobile home parks is going to go up in value. Demand is going up, but no cities are willing to zone new areas for mobile homes.", "replies": [], "depth": 1}]