Cimarron MHC On-Market MHP

31 Cimarron Dr Spring Lake NC 28390
$740,000
  • Lots: 40
  • Cap Rate: 8.51%
  • Acreage: 7.63
  • Investment Type: Value-Add
  • Total Tenants: 25
  • MSA/St: Fayetteville NC
  • Utility: Public
  • POH: 19

Executive Summary

 

Cimarron MHC is a 40 lot, value add investment located in a strong growing market, just 14 miles from downtown Fayetteville. Spring Lake has seen a 7.8% growth in population and has a median home price of $115,500, with Harnett County growing 18.1% to 129,000 people and a median home price of $169,200.

Cimarron MHC has a total of 40 lots that consist of 3 lot rent only tenants, 9 tenants on rent to own contracts, 13 rented POH’s, 9 vacant lots, and 6 vacant POH’s. 5 of the vacant POH’s will need to be renovated or demolished. Lot rent is $195 and home rent averages $386. There are 3 brand new Clayton homes, 2 of which are on a rent to own contract with a roughly $45,000 balance to the tenant. POH’s are an average vintage of 1993, with some being renovated and in above average condition, some average, and 5 in rough shape.

Cimarron MHC is on all public utilities, with tenants direct billed for water, sewer, and electricity. Tenants also mow their lawns. There is a flood zone in the back of the park which covers roughly 2 homes in the zone without base flood elevation (these homes are situated higher than the 100 year flood plain) and 5 additional homes in the zone of .2% annual chance flood hazard or 1% annual chance with average depth less than one foot or with drainage areas of less than one square mile.

This deal is being offered as a value add investment with an 8.5% normalized cap rate on current lot rent, and a 9.3% gross cap rate including POH income and expenses. At full price, using loan terms of 5.5% interest, 25 YR AM, and 35% down payment, the total return is 16.4% on normalized numbers. There is significant upside by executing minor lot rent increases and filling vacant homes/lots. Raising lot rent $10 throughout the park and only filling only 3 vacant homes results in pro forma returns of 18.3% cash on cash and 21.8% total return.

Highlights

  • Public utilities- direct billed
  • Below market lot rents
  • Good books & records
  • Park shows well
  • Strong April 2020 rent collections
  • 3 brand new homes
  • Population growth of 18% in Harnett County

Known Issues

  • Flood zone (low risk zone, only affects small portion of park)
  • Heavy POH (3 Brand New units)

Park Overview

  • Cap Rate: 8.51%
  • Cash on Cash - Non-Levered: 9.28%
  • Lots: 40
  • MHP Lots: 40
  • Tenants: 25
  • Occupancy Rate: 62.50%
  • Current Average Lot Rent: $195
  • Current Average POH Rent: $386
  • Gross Income (All Income Sources): $156,852
  • Lot Rent Income: $58,500
  • Gross POH Income: $93,360
  • Water Info: Public - Direct Bill
  • Sewer Info: Public - Direct Bill
  • Flood Zone Info: Yes

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