I am looking at a park with 36 occupied lots. No POH’s. On city water and septic tanks. When I pulled the county permits, the park is actually approved for 40 homesites. Current lot rent is $175 and the water is master metered. Expenses are supposedly $19-20,000 per year. Current owner has had the park one year and paid $400k for it. He doesn’t have any "official’ records and he does not insure the park. Here’s what the agent sent me for expenses: Water $900/mo, Exterior lighting $185/mo, trash pickup $268/ mo and taxes $2722/yr.
The county has about 168,000 people and the jobs are agricultural and large public university and medical center. It’s the only city of any size in a rural area of eastern NC. The lot rent is a bit low for the area. The asking price is $649,000 but the agent says they are hoping to get in the mid to high $500k range. He SAYS the have had a lot of offers, but thus far nothing is under contract.
I’d love to know what you think about this deal.This would be my first Park. I’ve owned apartments and single family homes in the past.
Thanks in advance!
quick math-
36 x 175 = 6300
6300 x 12 = 75600
75600 x .6 = 45360 - this is quick and dirt for the NOI
45,360 / 649,000 = .06989 or a 7 cap
45,360 / 500,000 = .09 or a 9 cap
For a park with septic- I am guessing your in the 11 or 12 cap range-
45,360 / .11 = 412,363.64
45,360 / .12 = 378,000.00
So- I can see if they want 649,000 and might want offers at $500,000 why hey are still not getting what they want… That is my quick and dirty… hope it helps
This whole deal sounds sketchy. “The owner has had it for just one year and now wants to sell it, but does not have any books” = the real numbers (and quick flip) show the deal is a dog. “Lot of offers but nothing under contract” = buyers lose interest when they see the real data. “$500,000” = insanity.
A few thoughts about the ‘I don’t have any numbers on the park’ story the current owner is giving:
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It will be nearly impossible for him to sell it to anybody, because no bank will lend anyone else money against a property with no numbers. So there can’t possibly be any offers on the park - except for all cash, and those are low and rare. And anyone with that much cash is likely to be an experienced MHP investor who would know that with ‘no numbers’ it is the buyer who is in the catbird seat. That said, the seller may not really have to sell for any reason.
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The seller has almost certainly deposited the rents into a bank, and paid expenses out of that bank. Even if the guy is a little dishonest and skims some cash off the top, I’ve never heard of a park being operated without any bank account at all. That would imply the owner is paying all his bills with cash and must have a desk drawer full of cash. Long story short, ask him where he banks and ask for the past 12 months bank statements and you’ll be able to reconstruct the P&L.
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Ask to see the seller’s tax return. He should have declared some amount of income from the property.
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Unless the park has run afoul of some City/County ordinance, or unless the employer in this town has just shut down, the property is probably pretty stable and has value. I’d agree with Jim’s numbers above and would look to pay about a 12-cap for this property.
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It never hurts to make an offer. Wayne Gretzky said “You miss 100% of the shots you do not take.” Why not make a 12-cap offer, subject to ‘verifiable income and the property being in good standing with the city and securing suitable financing, etc. …’ and see what the seller does.
My 2 cents worth,
-jl-
Thank you both! I just got an email from the listing agent, the owner is dropping the asking price to $525k and offering owner financing. I’m going to take your advice and offer him a 12 cap to see if he’ll bite. Thanks for confirming what I was thinking. Janene