One piece of info I left out for brevity - I have a quote from a local dealer to deliver and level clean fully functional single wides for $5k each, I was guessing I may be able to do slightly better. I figured worst case would be $5 to 6k per unit.
If I sell at approx $10k each, 60mos of $300/mo is over 26% interest. Is this real? I was figuring about 10-12%. Man, I need to do some homework.
I wasn’t expecting 40% expenses on the land, more like 20%. Why so high? All underground utilities are brand new. Taxes, insurance, and a little maintaining of the gravel roads was all I was expecting. I would be doing my own management, and selling all units to reduce unit maintainance to the lowest level. I’m sure I’ll eventually end up with a few units back in my lap, but I’m figuring that to be the exception. Hopefully be able to make some lemonade from them.
I’ve just been offered a deal to buy an empty MH park which I think has some strong cash flow possibilities. I have a fair amount of experience in rehabbing SFH, but no MH experience. The deal:
Park: 11 empty spaces, single wide only, brand new underground, gravel roads
Purchase: 169,000
Terms: Owner carry back 90% at 8% for 30yrs, 7 year balloon. Defer first 6 mos payments.
Comp space rents: $250/mo
Seller motivation: Wants out, doesn’t have time to develop - bigger fish to fry.
I’m considering aquiring 11 single wides cheap, place in park, rehab, and sell for approx 10k each - I carry paper. I’m budgeting 2-4k aquisition/moving/rehab costs per unit.
This seems like a cash cow from my initial analysis, although quite a bit of legwork. I’m concerned I’m missing something. Can you see something I can’t?
Posted by Kristine-CA on June 29, 2003 at 11:00:29:
Carl: I am assuming this is the same deal I looked at in Kern county? Same number of units and same price, anyway. If so, you don’t mention that there is a small house on the property as well.
If it is the same property, I am wondering if you know that area well. I invest there and there are some serious caveats you should consider.
It sounds like you have already made your mind up on this deal Carl. I agree with Ryan that the price seeems way too high for a piece of dirt, even if it is improved. First thing I would suggest you sit down and think about is who is taking the risk in this deal. Is it you, the seller, or the guy selling you the MH’s. Good terms seem nice up front but it is still a liability on you. If you have alot of time on your hands this might be a great opportunity.
Good luck,
Doug
Sounds like a decent deal, the only thing is the mobiles. It’ll cost you $2000 just to move and setup each mobile. so it should be more like $8000 per MH after buying mid 80’s repos and moving and setting them up. Then sell them on notes for $300/month over 60 months. One thing you could do that i read of people doing for land/home packages is, charge $550/month or so, includes lot rent and mobile payment. When the 5 years is up,the person would be paying $300/month for the lot rent, taking into account 5 years of appreciation. If that makes sense. Just build the 2 payments into 1 for your tenant.
One last thing, I think the price is way to hi for a completely vacant 11 lot park. At $250/month, assuming 40% expenses, a full park would bring a NOI of $19,800 per year. At a 10% cap rate, thats $198,000 value at FULL occupancy, there is no way you should be paying even close to that if its VACANT!!!
Thats awesome he will finance 90% of it, but at least negotiate with him on the price. I mean you are going to be putting in close to $90,000 of cash just into buying mobiles so you can even begin bringing cash in!! Now the no payments for 6 months is nice. Try to negotiate that to 1 year, which would allow you to bring in $50,000 or so in rent if you can get them all filled for 8 months of the first year you have it. Cus you know it will take a few months to get the mobiles in, then get them filled.
Looks like you have a real good possibility here, but you may not get your cow to produce any Dairy products for awhile if you can’t get a lower purchase price and longer no payment terms.
If oyu have any other questions, drop me back an email.
Chances are excellent we’re talking about the same place, yes there is a small house on the property that I didn’t mention.
I have no experience with either MHP or Kern county (sounds like a recipe for disaster, I know). I invest in SFH’s in the next county north, as well as on the coast. Please, please, share anything you know. You’re welcome to email me off the board as well.