I would not bill back the trash, just leave it in the rent. If you raise the rent to $200, then the rough economics are 21 x $200 x 12 x .7 = $35,280 in net income which, if you buy it at $310,000 equates roughly to a cap rate of 11.5%. The only part of what you are saying that needs to be clarified is:1) Does this park need any capital repair costs? Will you lose any tenants when you start kicking out the large dogs and rule violators? Both of these issues are going to impact the price and NOI, and you need to budget something for both when you make your offer.2) There’s no way you’ll be able to do a cash-out refi on this deal, as those are only attainable if you get a conduit loan, and that would mean at least a $1 million loan size. Banks (at least none that we know of ) don’t do cash-out loans unless it is a well-seasoned refi that you have owned for a while. if you are trying to build capital to buy larger parks, you’ll need to sell this one at a profit and re-invest again until you work your way up to conduit, if the plan is to buy/fix/refi and take cash out.
4-5 larger dog owners. Evicting them means losing 4-5 mobiles unless I buy them back. Lots were fairly tidy, 2-3 could use some debris cleaned up. Park condition overall is pretty good. New paved road.
I was hoping to pull money out when I have 28 filled but after what you said, I’ll check with my local bank to see if that’s possible.
So you’re saying to evict any owner with a large dog.
Be patience, I am dealing with a buyer that says he owns 8 parks but since he is using a banker I know the official says some of the parks he only has a 10% equity and does not own any park free and clear and thus when wanting to buy one of our outstanding property is failing. A friend in 08 lost 4 parks at one time when the bank thought their security interest was weak and called the loans all due and lost the 4 parks since he had no liquid cash. In the last 6 months I have met buyer after buyer that are cash poor and are in poor condition IF their is a hiccup in the park business. Create a cash cow and work it hard and then sell when you can upgrade to a 60 space park or larger and then own property that you will never sell unless someone wants to pay a premium for it. Go slow and ask questions and after many opinions make a decision. Trust me one can have a fabulous lifestyle owning just 2 outstanding parks with little or NO debt.
Hi Louvie,I’ve seen a few of your postings recently and I think this sounds like you’ve got yourself a great entry level deal at $310k. If I was starting small I think this sounds like exactly the kind of park I would want. Just be sure you know what to expect when negotiating the final price. That’s Frank’s point, I think – the capital costs may be hidden. With a small capital reserve, unexpected surprises can set you back a few years in terms of income. Are you planning to live on the income the park produces? It sounds like you are not, in which case $15k a year that you could, “worst case,” plow back into capital improvements sounds like a fine reserve. Who put in the new paved road and why? (to cover digging up a utility problem?)If the park looks good and has stable cash flow, you will be able to sell it to the next guy down the line, easy. Your job if you buy it is to take it from current condition to $200 lot rents, plus a little bump each year ($5 is only 2.5% per year and less thereafter). Is the tenant base in this economy going to stand for that kind of rent raise? If you’re not sure, then you’re not going to have good luck trying to fill those 4 lots. I like that there is a Wal-mart nearby. Is it a “Super Walmart” or just a regular one? People will go to the walmart, so as long as it’s there you will not lack for traffic. Plus, the development that will follow Walmart will only benefit you. Make sure it’s the “kind” of Walmart that is attracting development (in this post-slump “recovery” I have seen a lot of new cell phone stores, chain drugstores, chain fast-food, etc that seems to spring up around Walmart in the areas I’ve been scouting).I like that it’s city water/city sewer. To repeat what Frank said, do your due diligence and know what to expect in the next 2-5 years. Plan for a worst case. We have done major capital improvements on 100 space parks and there’s nothing we couldn’t pay $15k at a time – but that’s a year’s worth of income and you can probably work out a deal with the kinds of people that charge that much to pay down the cost over time (worst case). Assuming you can pay the contractors off at some reasonable rate, what’s the maximum amount you could stomach for capital repairs before you would be forced to sell? How likely is that? Can you tide things along with just the park income, worst case?I like that you can “fix up” the park by raising the income & getting those 4 spaces on line in a reasonable amount of time and get them filled quickly. Can you get them filled with other people’s money?Here’s one bit of caution – you won’t get 28 x formula for the park when it’s filled. All the banks that I’ve talked to underwrite a minimum vacancy, and you will likely find that your buyer will also.Therefore I would say your plan is to go from current “sketchy” occupancy to 28 perfectly groomed lots and 25-26 perfectly groomed tenants that are paying above-market rents for 24 months (most of them are already there I hope). How fast you get there and how much money you take out (or have to put in) along the way are the unknowns only you can determine.Keep excellent records of your progress (photos, etc) and assuming you can get the park filled, you will be well poised to get a cash-out refi and/or get a great cap rate upon sale. That’s what I think, anyway.Brandon@Sandell
Thank you very much, the paving came due to improvements in the city water/sewer upgrade and the previous owner only had to pay a portion of the cost to pave this U shaped road through the park. I spent the weekend touring local towns looking at parks and for the size, this one somewhat a breath of fresh air. I saw some train wrecks for sure. It was when I drove back through that I saw some dog fencing, a large bull dog in a window, medium dog tied up and a Shepard in a pen.Sounds like i would have to come up with some way of getting them to give up their dogs or leave. Hopefully leaving the trailers. Local broker said I might be able to get the additional pads built here for around 5k, He actually said less but I bumped it to at least that.As long as I didn’t do any other investments I would still have access to 40-50k. Im actually just sitting down to order the home portion of the course right now.Thanks for taking the time to reply…Greatly appreciated
If the roads are new and the sewer, water and gas lines are fine. What other capital costs would I need to have on my radar. Except there is an additional barn type structure bringing in an additional 160 month, I could see that one needing touch ups.Thanks