First park- help with analyzing

21 units ;20 are owner owned. ( No park owned units.) Park stays full always. Lot rent is 295, one house rent is 475
Manager gets reduced rent of 35$ plus 700$ a year
helper/maintenance for yard gets 75 a month reduced rent
Utilities water/sewer/trash 12000 park pays ( total expenses 24100)
income net 49,000 By putting the utilities onto the renters it will increase the net 12000
gross 75000
built 1970 Located in excellent town with large population.
Closest park is 3 miles and very similar age and looks and ect. Rent is 335 plus utilities

There is a 250k note that is assumable from the previous owner at 8% with 14 years remaining on the note. Present owner want to be cashed out for the 250,000$
Cannot find a lender that wants to loan under 1 million except hard money.
Seems like an ok deal. What am I missing?

Is the property city water/sewer?

Why is the owner selling at what seems to be a discount? How long has he / she owned it? Any major capital expenditures needed? Have you approached several smaller community banks in this town for a new loan?

Yes the utilities are on city. The units already have meters installed for sub metering.

He has owned for 7 years. Wants to retire. So far I see no real expenditures needed. Paved road could use good maintenance and and possible new overlay. I think the water pipes are the original ones when the park was built.
House roof is good for 5 more years.
They do not advertising or have a waiting list as no one ever leaves. There is a automatic rent raise of 5$ a year. Only one bank so far was willing to discuss it with me and they are not interested in a park.

City also said no problem replacing a mobile if need be.

update – I read $500,000 price which is not a steal but seems reasonable – Obviously $250k price is different story. Much better.

~$25k per space at $295 lot rent is about 85x gross. Your expense ratio will make-or-break the deal – get a very good handle on what the expenses will be for the way you will run the park.

Run the numbers again the way you think you will manage the park – and you ought to have at least some vacancy or you can raise the rents until you do.

You state gross 75000 which is $6250 per month.

You also state $295 lot rent and 20 (or 21?) lots rented; plus (or including?) an apartment.

$295 times 20 lots is only $5900 – so that’s $350 per month that you have to account for.

Do you mean manager gets $35 discount on rent or $260 discount?

You cannot include the apartment rent as though it were lot rent. In any case, I would assume a manager can live in the apartment for free or you’ll be paying a manager in some other form. What are your other expenses (taxes, maintenance – don’t forget this!, insurance, some other stuff, etc).

Assuming you run the park this way (manager in apartment), I would run the numbers assuming something less than 100% occupancy – 5-10% vacancy is not unreasonable which is 1-2 lots for you.

In any case, it’s all hand-waving at this point so figure proposed purchase $500k for the park at $6000 gross per month and it is already financed at 8% rate 50% LTV. That’s not great financing so count on doing better with a bank, but it’s flexible so that is better. If you can find a bank.

(A) Either you’ll have to cough up $250k (or a little more for startup – call it $300k) and you’ll be paying $2,390 per month in P&I. Count on your gross being a little less than $6,000 as previously calculated. If your expense ratio is near 50%, you’ll be seeing $3,000 in expenses leaving you with about $600 monthly in profit (plus mortgage paydown) on your investment of $250,000. (or $300,000, or whatever). That’s a cash-on-cash return of less than 3% plus mortgage paydown, which is part of your capital gain. Plus whatever capital gain, which is protected (hedged) against inflation because you can reset your income commensurate with the pace of inflation and take on debt which is long-term fixed.

Is that an acceptable gain for the risk you’ve allocated (risk of not “making” a 50% expense ratio plus risk of anything else not being right in my analysis?)

(B) At 30% expense ratio (through your superior management) you’ll be seeing expenses of $2,400 (P&I) plus $1800 (30% of $6,000 gross) leaving $1800 monthly in profit which is 8.6% cash-on-cash, which is a heck of a lot better than you could count on in practically any other investment with a relatively low risk profile.

Can you keep your expenses down to this level? Is that a risk you are willing to take?

© If you can refi at 30% down, 6% rate on 20-year amort, you’ll have $150,000 in the enterprise and P&I of about $100 more per month. Assuming a 40% in-between expense ratio you’ll have $2400 per month in expenses, $2500 per month of P&I total of $4,900 from $6,000 gross, leaving $1,100 per month profit on $150,000 investment. That’s 8.8% cash-on-cash with fairly conservative numbers.

(D) I made up my numbers from your numbers. It’s your job to get the “right” numbers during DD.


1 Like

Did you mean you want to buy for $250,000 of debt with $0 down?

Or you want to buy for $250,000 cash (through your own source of financing?)

In either case, analysis above for $500,000 with 50% LTV can be suitably modified as an exercise for the reader.


I guess that makes more sense - rough valuation at 21 * 295 * 70 is $433K, so it’s not too far off and given it’s in great shape seems could be a nice little turn key place.

You can try contacting Pierce at Security Mortgage Group at (585) 423-0230, but I think their minimum loan is 500K (e.g. ~715K sales price with 20% down) - maybe that has changed though. He might be able to refer you to someone else.

@Brandon as usual covered all the other high points.

1 Like

One word of caution … never include principal pay down as profit or ROI. You do not see that money unless you refinance or sell and there is no guarantee you will ever see it. When investing in a income property be conservative and only count the income you can spend to put food on your table as actual profit.
Never count your chickens before they are hatched.

1 Like

Give us an idea of what kind of lenders you have contacted already.

A deal like that will require a classic “small town bank”. The kind that has no branches and is right on Main Street in the old downtown area. The loan amount is too small for a loan broker (loan is $400,000 roughly on a $500,000 deal size), and way too small for the commercial lending department of a regional or national bank, which can do a $400,000 on a house in 30 seconds without a second thought so they don’t need you and you’re “weird” park loan (which they know nothing about). A small town bank would look at your loan as being large enough and they know the market.

1 Like

I only talked to one bank there and they want only bigger things. I am concentrating on smaller local banks today as Frank suggested… I am finding that there are more of them than I though, there. I called a local insurance company and ask them to tell me if they knew any local banks and they gave me a lot of them. Good idea for me!!