Re: Mobile Home Park for Sale(Need help Owner Wants 50%Dwn) - Posted by ray@lcorn
Posted by ray@lcorn on October 05, 1999 at 22:11:42:
Jim:
There is always a reason for properties that stay on the market without selling. Usually the owner is out of line on price. On this one, the owner isn’t only out of line, he’s in the ozone, which is why he’s still an owner. There’s a big difference between an owner and a seller.
First, I think you better double check the expenses. You’re missing a whole boatload of stuff that has to be paid. Property taxes, insurance, sewer expense, and maintenance just to name the biggies. If the landlord is supplying the water and sewer, then the expenses should come in around 35% of gross rents. Using the income you gave us, and sparing you the lecture I give about never using pro forma numbers for valuation, here’s how I do a quick and dirty valuation:
$75,000 Gross Potential Income
$-5,250 Vacancy and collection loss (7%)
$69,750 Total rents
-24,238 Expenses
$45,512 NOI
12% cap rate (generous on a small deal)
$379,267 Value
$140,000 Plus houses (2)@your numbers
$519,267 Total Value
No wonder its been for sale for 18 months.
If the owner were to get realistic about values, then there would be a play using the houses for the down, but I suspect you won’t be telling the owner anything he hasn’t already heard. My advice is to go find a real seller.
Sorry to shoot it down. If there is other info that would change something above, let us know and we’ll take another look.
ray