Have had rentals for a few years and in a county next to me a park is for sale or lease with option. Just seeing what everyone thought about how a lease should be structured?
Thanks Joseph
Another name for it is a Master Lease Option. Frank has commented that he’s done these before.
Lynn (FL)
Are we talking about a lease/option to buy a park or to sell a house?
park. He is wanting to retire/sale I dont want to jump in head over hills to say. But the park is run down a very small park 16 pads 14 POH and 1 lot rented 1 lot vacant. Price is neg. he is asking 249k but that is high and he know it. just wanting some option on how this master lease option work. I know that it will need a mothly lease a sale price in like 5 yrs and an option payment. or I guess
What’s the lot rent?
125 month total rent with homes is 5305
15 x 125 x 12 x .6 x 10 = $135,000. I’m assuming the homes need about $4,000 of work each, and are worth $4,000, so I’m valuing those at zero. So the price is roughly twice what the real value is. And I’m even being kind on the actual value, because small parks have to be sold at higher cap rates, and the expense ratio is probably more like 50% than 60%, due to fixed costs.
So there really is not a deal here unless you get the price well under $135,000. If the guy would agree to $100,000, it might be worth working on – but even then it’s not that exciting. The only way that you can convince me that the deal has merit is if the market lot rent in all the other parks in the area is around $250, so that you have the upside of raising the rents.