MH Deal…What Do You think? - Posted by D.Mills
Posted by D.Mills on October 26, 1998 at 14:43:24:
I have located a possible deal in the Eastern part of North Carolina. The owner, the wife of the former owner who is now deceased, is selling 16 mobile homes on lots that she will maintain ownership in. The specifications are as follows:
Location: Eastern North Carolina
Units: 16 MH Units broken down below
7 on one piece of land
4 on one piece of land
2 on one piece of land
2 on one piece of land
1 on one piece of land
Price: $70,000-All Cash Sale
$75,000-All Cash Sale
Rents: Each Rent is currently $300
Lot Rent: $100/Although Current Owner will get this
Terms: Owner will finance 45K at 10% for 5 years
Remaining 30K yet to be determined
Taxes: Unsure, I estimated $800 per unit annually
in my pro-forma
Water: Tenants pay except for six units (appx.
$35/month/x 6 units x 12= $2520 Annually.
Trash: Tenants responsibility
Ext. Lights: Current owner will pay for 10 years
Septic: Current owner will pay to have pumped out for
Year Built: 85, 81, 85, 75, 75, 72, 73 -Lot 1
77, 78, 86, 73, -Lot 2
81, 84 -Lot 3
72, 73 -Lot 4
77 -Lot 5
Vacancy: Currently one unit vacant, but a potential
tenant is in the process of being qualified
I modeled appx. 1,800 in expenses per unit per year for five years (the length of the financing). With those numbers, the owner financing 45K at 10% for 5 years and the remaining balance at 8% for five years, I think this might be a good deal. My cash flow at the end of year one, assuming no catastrophes, will be somewhere in the range of $10,795, $13,442 in year five and approximately 29,568 annually once I have satisfied my debt. That is assuming a total annual payment of 11,473 on the 45K at 10% for Five Years and $7,300 for the remainder at 8% for five years. Total Annual Debt= $18,773.
My question is should I approach the owner about financing the entire 75K at a higher rate (so that it looks better to her)? I could point out the taxation on the 30K couldn’t I? This might make her more willing to finance the balance.
In closing, have I missed anything? I could use any advice out there on how to structure this deal to be better on my end, plus, I don’t want to have to locate an additional source of funds.
I am currently trying to finalize an Option to Purchase that the owner has agreed to give me for a small amount of money. Should anyone be interested in purchasing that Option, I could sure use the quick cash in exchange for a cash cow!