MH Park Deal, What do you guys think? - Posted by Kent TN
Posted by Kent TN on June 29, 2004 at 07:08:05:
I posted this on the commercial board but haven’t gotten any feedback yet. I know there are park owners who post here. Anyone done a deal like this?
Asking price is $1.15 million. It is 38 acres. The park has 201 total spaces, however only 51 are complete. Of those 51 spaces, 40 are rented at $165 a month. 36 of the lots are double wide lots and about 10 of them are finished and rented. These DW lots can be sold individually For $10,000 to $12,000 each. They are seperated from the rest of the property by a ridge. The unfinished lots lack about $3000 per lot to be finished. The electricity, sewer, and water are already underground and the property has been graded. This much was done several years ago, and stopped when one of the principals died. There has been a great deal of erosion, so more grading will be reqired with paving and finishing the utilities off. The park has been severely mismanaged, stolen from by a previous manager, and little growth has taken place in last two years. It was almost foreclosed on last month, and if I don’t buy it it will be forclosed on. The original balance owed is 1.8 million. The bank has agreed to short down to 1.15 mil. There are 12 homes that are owned by the principals, but convey seperately from the park. These homes are are 2000-2002 models, 6 single wide, 6 double wide. They are valued around $150,000. They provide almost as much income as the park, however they are rented, not on notes.
The park is in a rural area, but only 15 minutes from Knoxville TN. Demographics are weak for the county that the park is in, but Knox County demographics are strong. For this reason, I’m having trouble estimating an absorption rate. Most current residents of the park are driving to Knoxville for work. The average resident of this county drives 30 miles to work.
I have seen numbers from 2002, but nothing newer.
40 lots at $165 = $79,200 gross
- .35 expenses = $51,480
Value of park at 12% cap = $429,000
Value of the 150 unfinished lots = $500,000?
Cost of completing the 150 lots = $400,000
Income from home rentals = $45,600
I have a financially strong partner and we have a loan quote of 1.4 million at 5.5% 15 year term, 5 year balloon. The debt service on this is nearly $140,000 a year. My partner has a million dollar medical office financed with this bank. The FHA loan mentioned in DealMaker Guide sounds good, but takes 3 months to close I’m told. What is the best way to structure this deal? Is it worth pursuing? Should we buy the park owned homes and convert to notes? Ray, Your help is greatly appreciated on this one.