Hi everyone,
Facts - I am looking at a deal in Alabama. Right now 84% of the homes are on RTO with super long pay-off period, average from 5-12 years. I also found out that the owner didn’t charge a sizable down payment. The current monthly RTO rent is $385 versus home rent is $430. And the park is 95% occupied. I also called surrounding parks, all of them are full. And in the 14 year ownership of the current owner, only 4 people become true home owners. The RTO payments include 15% markup, but doesn’t cover the expense of repairing and maintaining the homes.
Questions - How much can I pay for the note of the homes? The seller wants the residual value. After analyzing each home (mostly from the 1995-early 2000 model, in really good condition), I use the discount rate of 60%. Does that sound about right?
What would you do once you take ownership to get true home buyers?
Thank you.
Karen