So I’m verifying income on a park by grabbing the 2016 & 2017 Schedule E tax statements, last two years of deposit slips, certified rent roll, signed leases. I wasn’t able to get the Bank statements because they have personal transactions mixed in there. I don’t have any reason to believe the income isn’t real but I am naturally more suspicious than I am trusting. So how do I know if the funds being deposited are really from the park income and not from some other source?
Best,
Gulliver
Get more tax returns…2 more years at least.
Personally, if no bank statements then I walk. The fact that they put their personal stuff in there isn’t relevant: I want to see the DEPOSITS, made typically around the 1st-3rd of the month. I want them to total what the seller says he/she collects in rents.
Even with Bank statements they will show cash deposits. With cash deposits you don’t know where that’s coming from. What I’ll do is go to the park and count the occupied homes and muliply those by the lot rent to get an idea of the real income coming in.
Get the esstopal letters and start front that point. Chances are there are delinquent residents and you may need to estimate. If you buy you inforce no pay no stay and expect some turn over.
Place the onus on the seller to prove their accounting numbers and if not possible either you walk or take a chance. You should be able to find a consistent bank deposit near the first of each month to show rental income. For every excuse the seller makes you drop your offer price.
If the seller is not able to prove income you adjust your offer accordingly. Poor book keeping results in lower resale value.