Hey all, hope $$$ is being made! Need some perspective…
Small park of 33 lots/ 32 being occupied- 29 @ $330 and 3 @ $350 (rent to all be taken to $350 soon). No POH.
City utilities- park pays water/ direct billed electric to the tenants. Well for irrigation.
Expenses claimed to be avg’d at $3,000… Water- $1500, trash- $500, taxes and insurance- $1000.
Developer/ owner claims that park runs very low expenses. Recently got a bid of $20,000 for individual water meters to be installed to direct bill water.
Asking price of $900,000. Possible owner finance w/ 50% down (not that I have it )
Local park to me, no travel issues. Park in good area, secure, established w/ hardly ever a vacancy. Looking at talking to some banks and family (if needed) but will see. I know the expenses are low and not showing all expenses but do you’ll think the park has upside… Seems so w/ rent increase and water bill back. Thanks to you’ll.
32 lots x $330 x 12 x .6 x 10 = $760,320 at a 10% cap rate. However, even then, I’m not sure I’d want to buy it at a 10% cap rate. You have no upside except to bill back the water/sewer, which would take it to potentially $887,040. But then you have no additional upside besides maybe a small annual rent raise.
The owner is crazy to think he can get $900,000. More like $750,000 on his best day. And 50% down is ridiculous – the going rate is 20%. Can’t blame the seller for trying, but if he holds firm on those terms, it’s a safe bet that the park will still be available in the year 2050.
If that’s the best he can do, then there’s just one word for this deal: “next!”. Win/win deal making means that the buyer gets a good deal. This, as proposed, is definitely not a good deal for anyone but the seller.
Buy out-of-state. If you attend Bootcamp you’ll learn how to do this and manage remotely.
Even if you make a few mistakes being out-of-state, you’ll be so much farther ahead buying a park at a 12% cap rate in the midwest (especially if it can be turned into a 15% - 20% cap rate properly managed), than if you stay in your expensive state and pay an 8% cap on a park with little upside.
Thanks Jefferson. I’m finding that going out of my home state of NM will most likely be the answer. The difficulty lies in my mindset of ‘out of state, out of contact, lack of control, etc.’… Implementing systems should help with that but now I just need to man up! I attended the boot camp in January and gained a lot of knowledge, now I just need to practice it.
Thanks for all of your info and help by the way… Appreciate all of you guys.
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