I’m currently evaluating the following deal in the Midwest about 2 hours drive from my home:
80 spaces at 90% occupancy or 72 occupied lots @ $230 per month. There is city water and a septic treatment plant, but there is city sewer available about 100 yards away. Nice park with concrete streets and off street parking in a metro of 77K. Homes look newer.
Current NOI is shown to be $135K.
Our standard calculation is: $230 x 72 x 12 x .70 x 10= $1,391,040 at a 10 cap but should the 10 cap rule be used?
Seller financing is available with 15% down, so how should that impact the valuation? I’ve lost a number of deals over the last couple of years (bought one though) because I was trying to buy them them cheaper than others were willing to pay. My gut says I want to buy this at an 11-12 cap but not sure I can with owner financing.
This park is about an hour from a major metro of 1.8 million and unemployment in that metro is 4.3%. The city the park is in has unemployment of 6% and Average home prices are $106K. Avg 2 bedroom apts are $706 per month.
Where would you put the valuation with and without the seller financing and would you do this deal?