Hello all, I am looking at a 13 unit park to invest some of my self directed 401 in. It looks like a decent deal, but I am wondering what you would recommend for an offer and how to best finance to maximize return. Or should I just pay cash for the whole thing with the 401. Details are as follows:
Purchase Price: $127,900
Land Size: 1 Acre, plus an additional .87 acre lot to the North of the site.
Mobile Home Lots: Income: $2195 per month,
Expenses: $450 per month, Owner pays for trash, sewer, water, taxes, and insurance.
Tenant Expenses: The tenants pay all additional utilities.
The property has very good cash flow; all lots are occupied at this time except for one and tenants own their trailers.
#1 ? vacant lot
#2? $175/mo. 4 mo.
#3? $135/mo >6yrs
#4? $175/mo >6yrs
#5 ? $175/mo >6yrs
#6 ? $175/mo >2yrs
#7 ? $175/mo >4yrs
#8 ? $175/mo >6yrs
#9 ? $175/mo >6yrs
#10 ? $175/mo >3yrs
#11 ? $175/mo >6yrs
#12 ? $175/mo >3yrs
#13 ? $160/mo >5yrs
Well Water: There is a well on the property, but the water to the trailers is city water.
Sewer/Water Line: The Seller owns the main sewer line
Seller also owns the sewer lines underground going to each mobile home. Seller owns the water lines from the city main to the lots. Each mobile home has its own water meter, which is owned by the Seller. The tenant is
responsible for maintaining cleaning sewer lines from their home out to the park’s main line on Pearl… The Seller maintains cleaning the main sewer line. If any of the sewer lines need further maintenance or repair, the park owner is responsible for that.
I'm no expert, and own no parks, so take this for what it's worth. LOL. But from what I've read, it sounds like a decent deal. Though the expenses sound lower than what they might really be.
Generally, you would estimate 40% of the gross for expenses when you pay the water. So, $2195 x 60% x 12 = $15,804 estimated net income. At $127,900 the cap rate would be 12%.
Leslie Thank you. I was looking at the cap rate as more like 15, but I should consider that expenses are more than likely minimized.
How would you propose financing or not financing this deal?
Ditto on the expenses. The water/sewer alone on 12 occupied lots would probably be $300-400 per month. Also, assuming the tenants mow their own lots, who mows the rest of it? Assuming it snows where the park is located, who pays for snow removal? Not much management needed on 13 lots, but who manages it and how do they get paid? If you do any of these things, do you plan on working for free?
I think it could be a decent deal, just look deeper at the numbers. The plus is, it's nearly fully occupied and the rents seem low. Also, if they have their own meters you can start billing the water back to tenants.
I wouldn't pay cash for the whole thing, unless you cannot get any other financing. Put 20-25% down and see if the seller would finance the rest. If not a small community bank shouldn't have a problem financing a park like that. Much success.
I have asked for copies of financial records and lease agreements. Stay tuned
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