Posted by ray@lcorn on June 25, 2004 at 15:45:15:
Dwight,
Sorry I couldn’t get to this sooner… hope you went and looked at the park.
On the numbers, you’ll have to normalize them to get rid of the owner specific charges that you will not incur (e.g. consultant fees, bank charges, legal, etc.), and include any expenses you will incur that are perhaps not shown. Each line item expense should be verified during due diligence, as well as the rent roll, delinquencies and any other income source.
As to the value, I don’t know what type of financing you’re contemplating, so I will assume that the $350,000 number accomplishes your return objectives. Without knowing how that compares to the asking price it is hard to say how to approach the deal.
On the extra land, I would look into the present zoning, development standards of any proposed use, availibility of utilities, etc. before considering its value or purchase. Raw land is typically valued using comparable sales in the immediate market, however if I have a development on my mind I usually work backwards from the maximum use (i.e. density, coverage, etc.) development cost and then see what is left for land.
If you’re not familiar with this particular market I would encourage you to do some research on growth rates, income and employment. Always remember that we do not make markets, we serve them.
ray