Posted by Chuck (AZ) on July 15, 2001 at 12:19:05:
If there was a “upside” to this property, wouldn’t the current owner have taken advantage of it by now?
Keep your eyes open bud, something else will come along. When it does, look at it “by the numbers” like I did. If it still looks good, post about it here and get a second opinion or two. Don’t make someone else’s problem, your problem.
Good luck.
mobile home park - Posted by kenboy
Posted by kenboy on July 14, 2001 at 21:53:46:
I found a mobil home park with 60 spaces and room for ten more. the asking price is 100,000 only 12 spaces are rented at 70$ owner is paying water sewer and gabage that amounts to about 200$ . also includes a building that once was a small convience store and two mobile homes. one problem is this is in oklahoma where there are lots of oil boom parks left over from the 80’s that run at 10% capacity any input as to what this worth or what would be a decent offer would be greatly appreciated
Re: mobile home park - Posted by Chuck (AZ)
Posted by Chuck (AZ) on July 14, 2001 at 23:21:15:
Let’s look at the numbers…
12 spaces at $70/month = $840 month x 12 = $10,800 a year gross. $200 a month X 12 = $2,400 a year in expenses. $10,800 - $2,400 = $8,400 a year net income (or $640/mo.).
You didn’t list any figures for taxes, insurance, maintenance, etc… so we’ll just ignore that for the moment.
However, just to make a point… $100,000 at 7% for 30 years would be $665.30/month for the mortgage. So, assuming you did this deal, your in the red for $25.30/month x 12 = $303.60/year… and that doesn’t include taxes, insurance, maintenance costs, etc.
And according to my calculator, the CAP rate on this property works out to be 100% at that price ($100,000).
A 10% CAP would be considered good. This park is generating 5% of it’s potential income.
If you could fill those 48 empty spaces, this would be a very good deal… however I’ve got a feeling that it’s unlikely to happen.
Income-producing properties only work WHEN they produce an income greater than their cost. You NEVER pay for POTENTIAL, you ONLY pay for the current cash-flow.
The questions you have to ask are “What’s the upside?” Is there a possability of increasing the revenue? Can you get more homes into this park? Why would people move there? What’s the attraction? What the status of any deffered maintenance? What shape is the infastructure in? What would it cost in improvements, to make this park worthy of investment?
Now just to give you a comparison, I recently bought a 9 space park for $139,900, it generates $3k a month in lot rent (no amenities). I sold all 9 homes “Lonnie-style” to the tenants for $1 a day (average) ABOVE what they were paying to rent them… and that generates another $2,700 a month (rounded)… for a total monthly income of $5,700 (x 12 = $68,400) for the next 3 years (until the homes are paid for). In short, the property will be paid for in less than 3 years, since I don’t need to draw a personal income from it.
I don’t think I’d buy this park at half the asking price. I’ve been to Oklahoma, so I know the type of property your referring to.
I just passed on a similar property here in Arizona (copper mine), and it’s grossing $19k a month at 50% occupancy.
The asking price was $1.985 million, it had a $900k hard money lein at 14%, interest-only payments of $10k a month, expenses of $2k a month, and was actually worth (my opinion - no upside whatsoever), maybe $200k on it’s best day… which was 15 years ago.
Food for thought.
Re: mobile home park - Posted by kenboy
Posted by kenboy on July 15, 2001 at 10:42:02:
thanks chuck, I thought it was worth somewhere in the thirties but when he told me 100k I thought I was missing something. I lived in arizona for 2 years and I know the areas you are talking about also