I’ve been back and forth with mom & pop (off market) for about a month. This deal has a lot of moving parts, I’ll try to keep it simple:
- 100 lots, lot rent $250 (substantially under market)
- city water/sewer
- 100% occupied
- paved roads
- owner is willing to finance 100% of it at $5K/month for 20 years
- BUT, they want $3M purchase price. Right now park is realistically worth $2.1M before any improvements
Another major issue is, currently the entire park is land-leased to another guy (75 years old) who owns 70 (!) of the homes. I also talked with him and he wants to work out a deal where I manage the entire park for him for 15% of the gross income ($469K last year), and convert all the park owned to tenant owned homes (he wants to do this).
The $5k/month with the actual land owners (also 75 years old) wouldn’t start until the current land-lease is up, so my expenses for the next 7 years would be zero, I’d essentially be managing & improving the park that I’ll eventually own.
If I went for this deal, my plan would be:
- Get it under contract with actual land owner, air-tight where he nor his heirs can back out of the deal
- Then get a deal worked out with the current lessee to manage his park for 10-15%
- Convert all homes to rent-to-own (rent credit, etc)
- Gradually raise rents to market
The fruits of my labor won’t come into effect for 7 years, but then I’ll be cashflowing like a beast for the next 20 years since $5K/month won’t even be 1/3rd of what actual bank financing would cost. After raising rents to market (within 1-2 years) the park would be valued at over $3M. In 20 years it should be no problem refinancing at a bank.