First off, I have to say that Jim Johnson must think I am stalking him at this point, lol. I have posted this potential opportunity in several different sites in order to get a range of feedback–so here I am. Any and all feedback is much appreciated.
Here’s what’s going on:
I had a potential opportunity come across my radar the other day, and am trying to figure out if it is a diamond in the rough or just a lump of coal. Here’s the rundown (with the info that I have so far):
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Bank owned mobile home park
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Asking price is $650k; bank turned down an offer at $410k, but the grapevine says that the bank is to the point that they are willing to do almost anything to get rid of it
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Park has 168 spaces, 1 basketball court, 1 tennis court
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Park is currently 10% occupied
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All the non-paying residents are gone, and all repairs to the park have been made
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Lot rent is $150 a month and includes water and garbage (park is on two wells)
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Surrounding location is SFR with a price point of the low $100s
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Expenses are currently unknown
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There is no onsite manager, but all 16 of them are paying rent on time
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There is an onsite handyman
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The bank also owns 3 duplexes onsite and 1 single wide
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The bank is willing to reduce their price as well as be very flexible with terms–and they are willing to finance, however, they are not willing to loan money for improvements
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Estimated current gross income is $3500/month
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Estimated cost for improvements (clubhouse, park) would be $100k
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Estimated cost for additional mobiles $10k per mobile (getting them for free off Craigslist and rehabbing them)
Seems to me that this could be a diamond in the rough if some more mobiles could be placed in there (perhaps do some Lonnie deals as well as contact some other investors and open the park up to Lonnie investors?)
Additional streams of income could be added such as coin op laundry, vending machines and a club house (which would be nice and could be rented out.)
My thoughts on this would be to approach the bank with an offer along the lines of:
Purchase price to be $425k, amortized over 20 years, interest only for the first 3 years, then adjusting to principal and interest with a fixed rate of 5%, with 5% down.
I think this park could be quite profitable if a nice clubhouse, on-site laundry and perhaps a park were added. …A website couldn’t hurt either!
The long term/exit strategy would be to buy and hold for cashflow and then refi out some equity in about 5-7 years.
Any thoughts on this? Is it a diamond in the rough or just a lump of coal?