Is my math correct?


#1

I need your help in running some numbers. What I came up with sounds way too good to be true and I want to bounce it off the rest of you.

Starting August 1, the residents at my community will be paying for their own water and sewer costs instead of me paying for it. Everyone’s lot rent will decrease to $210/month which is about the top of the market for SWs in my area. There are 37 occupied spaces at this time and most people will get a $30/month decrease in their space cost. (Most people now pay $240/month which includes water and sewer.) Water and sewer currently run about $2,400 per month. It could be less as we fixed some leaks but I don’t yet have the bill for last month.

Here is what I get:

Water/sewer bill eliminated: $2,400

Revenue reduction: 37 X 30 $1,110

Net monthly savings (increased cash flow): $1,290

Let’s say I save just $1,000 per month. That equates to increase cash flow of $12,000 per year. At a 10% cap rate, this means the value of the community has gone up $120,000!!! This can’t be right, can it? What am I missing?

Rolf


#2

That is why people infill parks with used homes. recently had an investor place 5 nice s/w in a Park for 55K they will rent for 600 per month…200 lot rent and 400 home. JUST additional lot rent adds 2400 X 5 = $12,000 per year at 10 cap added 120K to value of park. Expenses are basically fixed so most of that additional rental income drops to bottom line.

Then there is the 400 per month rent of home…round numbers 25K per year fig 40% expense and still pay back original cost of homes in 3.5 years using just house rental income. Lonnie them out and it gets even better.

Good job on cutting expenses in your Park Rolf,

Greg


#3

Rolf this is Tracy. We “spoke” before. Did you end up putting meters in then?? If you remember that’s what our business does. You can actually see which homes are the big leakers. Question?? Why do you have to lower the lot rents if they have to pay for their own water? Just wondering. Oh by the way, I have looked at 2 parks now to buy. I really liked one in MI… but my husband says it’s to far (4 hours one way) to manage. He also, didn’t like the fact that it wasn’t city water/serves… as the water man he’s always looking at that :slight_smile: I liked it cuz most of the mobiles were on the lake and it was clean. Now we are looking at 2 more much closer to home . Maybe I could get some advice on what’s a good deal, Thanks, Tracy