Help on evaluating a park - Posted by amills65

Posted by amills65 on October 22, 2003 at 07:50:23:

Thanks guys for the input. I agree that the price is too high. Wanted to see what everyone else thought. I hope to talk with the owner soon, and see what his position is. It’s been for sale for some time now. I still have more homework to do.

Help on evaluating a park - Posted by amills65

Posted by amills65 on October 20, 2003 at 13:50:20:

Found this in my local area.: “Motivated Seller” (haven’t spoken with him yet). Owners live out of state.

30 spaces 4 empty

Rent is $250

Manager lives in park w/free rent and $3114/year

Supplies $192/year

Insurance $588/year

Cleaning materials $831/year

Water/sewer $12,132/year (no seperate meters)

Repairs $7,926/year ($6000 was to repalce sewer line. Only one original line left, all others replaced already)

Park was refinanced in April of '96 on balance of $160,000.00 @9% int for 20 years. Balance as of 4/1/2002 is $137,240.00

Yearly note $17,274.96

Selling Price $500,000

I am still learning how to evaluate parks, and am looking through the archives for more info. Any input is appreciated.

Thanks

Re: Help on evaluating a park - Posted by Gregory

Posted by Gregory on October 21, 2003 at 15:07:06:

Here’s how it breaks down:

Assumptions:

  • You purchase at $500k.
  • You put 30% down ($150k).
  • You finance $350k @8% for 30 yrs.

Rent: $250/mo
Units: 30
Gross Yearly Revenues: $90,000/yr

  • Less -
    Expenses (45%)**: $49.5K/yr
    Mortgage: $30.9K/yr
    Pre-Tax Revenue: $9.6k/yr
    Taxes (32%): $3.1K/yr
    Profit: $6.5k/yr
    ROI: 4.36%

The return on this investment seems really low to me.

The only way this park would be a good deal is if:

  1. Rent is currently under market value (at $300 month, your ROI would reach 8% ROI), and you feel you can increase rent substantially in the first year or two.
  2. If you can get this park for substantially less than asking (if you buy the park for $400k your ROI goes to 9%).
  3. A combination of the above.

** 45% expenses is the national average for rentals, this includes things such as vacant lots, maintenance, advertising, taxes and insurance.

probably the best evaluation… - Posted by Greg Meade

Posted by Greg Meade on October 20, 2003 at 15:37:59:

of a Park I have ever read is below:


The very real fear with a purchase at this time is there being too little money left after debt service. Perhaps read some of Chuck’s current posts and fig out what you need to make this a comfortable investment for you!

Re: Help on evaluating a park - Posted by Chuck

Posted by Chuck on October 21, 2003 at 15:31:48:

Riddle me this… would you obligate yourself to pay $500,000 (over the course of 30 years) to make $6,500 a year?

Do the math… at that rate, you’ll break even in 76.92 years… just about equal to the average human life-span.

This is only a good deal, if you were born yesterday.

Re: Help on evaluating a park - Posted by burtchd

Posted by burtchd on October 22, 2003 at 11:24:49:

Chuck is right on the money with the fact that this is not a good deal(as is)“during this life time”. I definitely got a chuckle out his analogy. Also look at future appreciation via a “growing area”, job security of potential tenants, adjacent land to purchase,etc. Good luck with your endeavor.

Oops… should have read… - Posted by Chuck

Posted by Chuck on October 21, 2003 at 15:52:13:

Riddle me this… would you obligate yourself to pay $500,000 (over the course of 30 years) to make $6,500 a year?

Do the math… at that rate, you’ll (double your money) in 76.92 years… just about equal to the average human life-span.

Re: Help on evaluating a park - Posted by Chuck

Posted by Chuck on October 22, 2003 at 11:38:52:

Would you believe some people think I have no sense of humor…

:wink:

I’ll get this right yet… - Posted by Chuck

Posted by Chuck on October 21, 2003 at 16:11:50:

$500,000 divided by $6,500/year earned profit = 76.92 years to recover your initial investment.

I think my point is that this is not a good deal… no matter how you look at it.

:wink: