MHP #834: The Risks Associated with Using an Owners Understated Expenses When Running Your Proforma

Today's episode is from Mobile Home Park #60.

Charles and I will discuss mistake #15 from our popular eBook, “The 21 Biggest Mistakes Investors Make When purchasing their First Mobile Home Park…and how to avoid them.”

 There are times when using the owner’s expenses can work in your favor and there are times where it can work against you. As with any business venture, there are certain expenses you have to take into account. Virtually every property we have pursued has had some of their expenses under reported or completely left off of the profit and loss statements. So how do you determine what you are buying and what the appropriate operating expenses should be?

 Typically, we will start out assuming that any park the pays for water/sewer or has private utilities will have an expense load close to 45-55%. If the park is on city water/sewer and the residents are billed for the usage, we typically assume an expense load closer to 30-35%. This is usually a good rule of thumb on the “eye ball” test but each deal will require you to put a microscope on each expense in order to get a truly realistic budget.

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