Posted by Ray (MO) on May 24, 2005 at 17:38:39:
Thanks for the input, Bruce.
MHP , What do you guys think? - Posted by Ray (MO)
Posted by Ray (MO) on May 23, 2005 at 15:11:45:
We found a 26 pad park for sale. 20 pads are paying $50.00/mo inc. water/sewer and trash. No M.H. incl. in sale. City water/City sewer. The park is is the middle of town. An old vacant 2/1 house included in sale. Seller wants $158,000. I know a park similiar in size just sold for $130,000. The avg lot rents in town are $100- $125/mo. House and apt. rents go for $400-$500/mo.
Here is the question? What do you think if we offered $70,000 cash price OR $100,000 with the owner carry back $25,000 and we will come up with a $5,000 cash down payment.
This park is losing money as it stands now. With lot rents at $100/mo and seperate meters this park could be an excellent investment. The way I was figuring, at 20 pads bringing in $50/pad thats $1000/mo minus water at $300/mo thats 700/mo multiply that by 10 and we get $70,000. Is this a fair way to value the park?
Ray
Re: MHP , What do you guys think? - Posted by Chris Reuman (Maine)
Posted by Chris Reuman (Maine) on May 24, 2005 at 22:37:06:
Ray,
Currently it is negative cashflow, so you have to know how you can increase the income quickly. Usually, I don’t like negative cashflow deals, but the upside is huge here. My questions are: Why is the rent so low? With the rent so low, why aren’t all the lots rented? I would focus on terms unless you have the cash to carry the negative cashflow. As for expenses, you are missing a bunch: maintenance, legal, advertisement, property tax, insurance, electricity, trash, mowing, property management. If you analyze it with these expenses, the purchase price is very low, below $70,000. The key is if the lot rent can be raised to $100 or more without loosing a bunch of people. Or maybe you want to lose a bunch of people so you can do lonnie deals in the park. It comes down to how much cash you have to carry the park until it is turned around. Also, having enough cash to pay for the turn around, ie buy lonnie deals and move them in.
Best investing, Chris
Re: MHP , What do you guys think? - Posted by Bruce
Posted by Bruce on May 24, 2005 at 11:04:14:
No Ray that is not how you value it at all. Trailer parks are based predominately on the income and expenses it generates. This person has done you great services by letting the rent so low as well as the vacancies in the park and house. I would certainly try to lock this deal down strictly based on what I see. $50 a month are you kidding? A store and lock is more than that. At $100,000 it is a steal. Dont worry about vacancies or people moving upon rent increase. Those are all opportunities to make $$$$ There are recources to buy repos at well below market value and always people to Buy/Rent/Lease with option etc. I own 2 parks and it is truly the smartest,easiest and most managable resource I have found. I have sold off most of my other reral estate to concentrate my efforts on the parks. The are $$$$$ machines. All of this JMHO. Bruce