Any advice or suggestions from you guys would help! Is this a good deal? What would you do?
I am negotiating with a seller of small12 space mhpark in louisiana. Here are some of the specifics:
Seller is asking $125,000
10 of the 12 lots are being rented at $125 a month.
All utilities are tenant paid and with city.
Street is with city.
He says is only expenses is taxes of $200 per year and insurance which he says isn’t much because he has it combined with other properties.
All homes are tenant owned.
Property is owned free and clear and he is willing to carry the note.
Park is located in a city of 17,000 people. So filling the spaces shouldn’t be a problem.
I am willing to pay his price if he accepts a low down payment and good terms.
I am planning to fill the two empty spaces with rent to own(Lonnie deals) homes of $200-$300 a month plus lot rent of $150. Adding $700+ to my monthly income.
Will raise rents to $150 a month.
I will manage park myself as it is 15 miles away from my home.
I know that I am paying a premium price for the lots($12,500 pc), but the expenses are low and I have the option to add two homes in park.
Does this sound like a smart move to make? Any advice would help…thx
I am a newbie so please wait for one of the pros to answer.
I am taking a crack here solely so that I can compare myself with a experienced analysis.
Remember to compute an offer based on actuals and not potential.
That said, at a price of $125K with an NOI of $9750 (35% exp ratio), the CAP is 7.8% - way to high in my opinion for such a small park. I can’t imagine how the tax is $200/yr! (I need to move to LA )
I am using 35% exp ratio as I have seen on numerous posts here that we should not go lower even for tenant pays all parks.
Considering the above NOI and with a10% down 6% 15 yr seller carry back, your ROE is nil - you have no (or negative) cash flow!!
With the above financing structure, I would value the park at max $89K. The CAP is now about 11% with an ROE of 33%.
Again, take this with a (large) grain of salt, as they say.
Thanks for your reply. The park has been in this guy’s family for 30+ years so I’m assuming its local property taxes was assessed a long time ago. I know that price will go up with the new purchase. I valued the price of park also at around $90000. I’m willing to pay premium price for good terms. I’m offering $5000 down with payments spread over 20+ years with 0% interest. If he wants a high down payment, I need a much lower price. If he doesn’t budge, I’ll walk!
I think we’re all in agreement that you’ll be overpaying by about $35,000. However, you’ll have to make that call as if the goal is to find a park with $5,000 down and 0% interest that the seller will carry to maturity – those don’t come around very often. If you go forward with it, you need to raise the lot rent, and to find a Lonnie dealer to fill those last two lots. Hassan’s analysis is accurate, and it sounds like you’re in agreement with it. So you have the tools to make an educated decision on the risk vs. reward – and that’s one of the goals of the forum.
Remember that Louisiana is a “full disclosure” state, which means that you will have to give the actual sales price to the taxing authority, so I can guarantee you that $200 will no longer be the tax. So be sure to talk to the taxing authority (in general terms without specifying the property) and put the correct number in your budget.
For a discussion of missing expense categories and what your expenses might actually look like, please see the thread in this forum entitled ‘1st mobile home park Need Advice.’
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