Owner finance, please inspect


#1

I have an opportunity to purchase a park with 100% owner financing. 25 lots, 7 vacant. Private water and sewer. Nice town. The owner died and his elderly father is running it. The owner had 3 mortgages on the park totaling 400k. He has been in contact with the mortgage holders and has told me they all agree to hold the paper for an approved new owner. The monthly debt service is $2700. 14 poh and 4 toh. Grossing $8500 monthly. The place looks rough, the homes are a mess, trouble getting the tenants to pay etc. the loan would be non recourse. Please advise


#2

Run your pro forma on this deal and it looks like handcuffs to me. You won’t make a profit for at least 5 years @ 400K and those terms.


#3

J.C,

I agree with jhutston.
No profit here.

Remember, just b/c the seller financing is non-recourse doesn’t mean the underlying loans are. Be careful here.

Of course the current lenders will hold paper - they don’t want the thrill of management.

But – let the current lenders f/c on this (which is likely if there is no sale) and they’ll go from passive lenders to motivated sellers. That’s where you’ll get your discount.

Talk to the lenders and buy the note(s) at a discount that control the c/f on this park.

Gross is $8500? on 18 paying lots? That’s over $470/mo lot rent.
The expenses are WAY under-reported by the seller.

And the homes the park owns (14 of 18) need work.
How much will that cost?

Did I miss anything?

Oh yes, any balloons coming up on the existing notes?
Like in the next 5 years.

There ARE ways to make something here, but its not for the newbies or faint of heart.

Keep us posted,

Mike