Ray, need your opinion MH Park - Posted by Brian

Real Estate Investing Real Estate Law
1

Posted by Jeff on March 06, 2003 at 20:53:18:

Brian,

The details are a lot easier to read over at the birchrealty website. (look for the 88 unit park) This looks like it was a full time job for a family. Is that what you are looking for? 60 rentals is a lot of work. The park does look nice though. Have you looked it over? Will it fit least a 14x70? How about the more popular 16x80? Dosen’t look like it. Check to make sure you’ll be able to continue moving in the smaller homes in the future. Is that utility expense mostly water/sewer? Recommend submetering for water. I’d recast the income and expenses based on lot rent only. Would pay a purchase price based on that value plus somewhat below wholesale for the 60 owned mobile homes. Don’t get conned into paying the same price for a dollar of mh rental as a dollar of lot rent!

Jeff

2

Ray, need your opinion MH Park - Posted by Brian

Posted by Brian on March 06, 2003 at 20:20:01:

Ray,

I have owned and managed single family rentals for about 7 years now. Have a backgroung in commercial construction and real estate. I have been looking for some sort of multi-unit investment and this MH park just came up that is 20 minutes from me. What do you think?

CASH INVESTMENT: $310,000.00 TOTAL SALES PRICE $1,550,000 GROSS RENT MULTIPLIER 4.53
Inflation for Yrs 1-5 per pad: $7.00 Debt 70.00% $1,085,000 CAP RATE 11.04%
Interest Rate - Fixed 7.00% CASH ON CASH RETURN 17.47% NEW OWNERS
Amortization (Months) 180 DEBT COVERAGE RATIO 1.46 12 MONTH 2,002 2,001
PARKS OPERATES ON CITY WTR/SWR Monthly Payment $9,752 PER PAD SALES PRICE $17,614 INCOME: BUDGET Percent % ACTUAL Percent % ACTUAL Percent %
(Park pays for Water and Sewer) Balloon EO 10th Yr: $492,510
Rental $342,360.00 100.00% $343,674.00 100.00% $317,032.00 100.00%
REVENUE: Year 1 Year 2 Year 3 Year 4 Year 5 Total Laundry 0.00 0.00% 0.00 0.00% 0.00 0.00%
Gross Scheduled Revenues: Miscellaneous 0.00 0.00% 0.00 0.00% 0.00 0.00%
28 Pads @ avg rent of: $275.00 92,400 94,752 97,104 99,456 101,808 485,520
60 Rentals $400.00 288,000 288,000 288,000 288,000 288,000 1,440,000 TOTAL INCOME AFTER VACANCY FACTOR: $342,360.00 100.00% $343,674.00 100.00% $317,032.00 100.00%
0 House @ 0 0 0 0 0 0 0
Total Gross Scheduled Revenues: 380,400 382,752 385,104 387,456 389,808 1,925,520
OPERATING EXPENSES:

  • Vacancy & Credit Loss – PERCENT 10.00% 15.00% 10.00% 5.00% 3.00% 8.60% 12 MONTH 2,002 2001
  • Vacancy & Credit Loss – NUMBER 9 13 9 4 3 8 BUDGET Percent % ACTUAL Percent % ACTUAL Percent
  • Vacancy & Credit Loss – DOLLAR AMOUNT 38,040 57,413 38,510 19,373 11,694 165,030 Break down of actural utilities 2002
    (includes owners house) Utilities (Gas/Elect/Water/Sewer) 62,000.00 18.11% 60,852.99 17.71% 60,023.00 18.93%
    NET MOBILE HOME RENTAL INCOME: 342,360 325,339 346,594 368,083 378,114 1,760,490 Maintenance & Repair 42,000.00 12.27% 41,998.00 12.22% 54,452.00 17.18%
    Gas 34,390.22 Legal / Accounting 4,000.00 1.17% 11,535.00 3.36% 11,720.00 3.70%
    OPERATING EXPENSES: Electric 5,068.41 Office Expense 5,200.00 1.52% 7,096.00 2.06% 7,932.00 2.50%
    Average Expense Per Year @ 50.00% 171,180 162,670 173,297 184,042 189,057 880,245 Water 6,765 Property Insurance 7,500.00 2.19% 6,696.00 1.95% 9,775.00 3.08%
    Sewer 6,775 Telephone (See Office Expense) 0.00 0.00% 0.00 0.00% 0.00 0.00%
    NET OPERATING INCOME: 171,180 162,670 173,297 184,042 189,057 880,245 Trash 7,854.36 Salaries (maintenance person) 18,500.00 5.40% 16,916.00 4.92% 16,631.00 5.25%
    Trash Removal (See Utilities) 0.00 0.00% 0.00 0.00% 0.00 0.00%
    Annual Debt Service 117,027 117,027 117,027 117,027 117,027 585,137 Total 60,852.99 Advertising 2,500.00 0.73% 2,159.00 0.63% 992.00 0.31%
    Payroll 3,600.00 1.05% 0.00 0.00% 0.00 0.00%
    CASH FLOW BEFORE TAX: 54,153 45,642 56,269 67,014 72,029 295,108 Break down of Maintenance & Repairs Property Tax 14,500.00 4.24% 13,243.00 3.85% 4,071 1.28%
    Auto Expense 8,800.00 2.57% 23,138.00 6.73% 21,895 6.91%
    CASH INVESTMENT: 310,000 310,000 310,000 310,000 310,000 310,000 Trailer lot expense 26,198 Liscenses 500.00 0.15% 225 0.07% 225 0.07%
    Trailer supplies 15,521 Miscellenous 1,500.00 0.44% 0.00 0.00% 0 0.00%
    CASH ON CASH RETURN: 17.47% 14.72% 18.15% 21.62% 23.24% 19.04% avg Repairs 279

OVERALL CAPITALIZATION RATE: 11.04% 10.49% 11.18% 11.87% 12.20% 11.36% avg Total 41,998
TOTAL OPERATING EXPENSES: $170,600.00 49.83% $183,858.99 53.50% $187,716.00 59.21%
DEBT COVERAGE RATIO: 1.46 1.39 1.48 1.57 1.62 1.50 avg

GROSS RENT MULTIPLIER: 4.53 4.76 4.47 4.21 4.10 0.88 avg NET OPERATING INCOME: $171,760.00 50.17% $159,815.01 46.50% $129,316.00 40.79%

RESALE ANALYSIS: Return On Investment Analysis:

  • Resale Based On Capitalizing NOI IRR Analysis Cash Flows * Cash Investment 310,000
    In Year Of Sale At 9.50% 1,990,072 Year 1 (310,000) * Less Sales Proceeds 1,030,739
  • Less RE Commission @ 6.00% 119,404 EOY 1 54,153 * Less Sum Of All Cash Flow 295,108
  • Less Debt Balance EO 5th Year 839,929 EOY 2 45,642 * Total Gain 1,015,847
  • Before Tax Sales Proceeds 1,030,739 EOY 3 56,269 * Annualized Gain 203,169
  • Internal Rate of Return 39.44% EOY 4 67,014 * Annual Return On Investment 65.54%
  • Annual Return On Investment 65.54% EOY 5 1,102,769