Posted by Ernest Tew on September 26, 2003 at 05:35:45:
Hal, the price appears to be in line. However, the allowance for maintenance could be low and you aren’t including an allowance for management, bookkeeping etc.
It could be a good project to gain some experience but wouldn’t have a lot of upside potential for the time and effort you will need to devote to it.
Be sure to check with the governmental authorities to see what the regulations require and what you will be allowed to add.
You may want to pick up a couple of good books, take a few seminars etc. to learn as much as you can about the business before getting involved in anything large.
Boy, there sure a bunch of smart friendly folks on this site. Would be interested in your opinions. Looking for my first investment. Is this it? I know this is small, but if it turned out to be a mistake it wouldn’t be a great loss.
7.5 Acres Level, 3 cleared.
4x2 bedroom mobile homes
1x3 bedroom house
All currently rented by the month.
All units and house (1100sf) are park owned. 79,80,85,91.
All units pay own public utilites(water/electric/propane/trash)and cable. Each have separate meters. Two units per one septic tank.
Easy access to major interstate.
Plenty of room for expansition.
Units are older but well kept. Very clean property and well manicured. Excellent behaved renters (very strict rental agreement.) 71 year old owner is ready to retire and just doesn’t want the responsibility anymore.
$16800 Gross Income for the year
(820)Insurance
(255)Land Tax
(840)Maintenance (say 5%?)
(1680)Miscellaneous (say 10%)
(430)Mortage (70,000@6.25%)
total $12775
Asking $70,000
No doubt I am missing some other liabilites here and will due more DD if some of you think it may be worth looking into.
Re: First Opportunity? Small Park - Posted by Tony-VA/NC
Posted by Tony-VA/NC on September 26, 2003 at 09:34:35:
I prefer these type of smaller deals, especially those with room for expansion.
There is no real mystery to evaluating these properties, nor is there one true price.
The first step is to confirm the exact and true operting expenses and income. (Don’t forget vacancies)
Subtract these operating expenses from the income to determine Net Operating Income (NOI).
Decide what amount of money each month you want in your pocket.
Subtract that number from the NOI.
What is left pays the debt service (build in some reserve cash as well).
The final price and terms will be determined most by how much you desire to make per unit each month and how much you are willing to pay for that right. Always start at a lower price (or better terms) and negotiate from there.
Ernest is correct, you will be the manager of these properties because they will not support a full time manager. But if you were buying 5 single family units, you would be in the same boat. Having the units all together makes maintenance far more easy to accomplish.
The expansion reality will need to be confirmed with the zoning, building, Dept of health and whatever other controlling gov’t agency dominates your area.
Again, my value is based upon the amount of effort and money it will take me to realize the income stream I desire from this property.
Posted by Greg Meade on September 26, 2003 at 06:26:43:
expenses (total) for the Park will most likely run a min. of 30% with park owned homes…maybe not every year but as a round fig they will over time. with 2 units per septic, sounds like you could increase density. Will zoning allow you to bring in more units? at what cost? A hot ticket here in FL is add a few rv spaces…can put seven on a septic and the spaces rent for 120 per week! I am a great believer in starting small and as an exit strategy these small parks sell well for the retired investor! See if you can beat the price down for cash or ask for some terms!