Posted by Eddie-Mi on April 20, 2006 at 16:43:52:
The small size of 7 units limits your upside because you dont have additional lots to fill. I would get a current rent roll from owners and personally call for expenses (water, RE taxes, insurance, trash, etc). You need to closely look at the fixed expenses. The biggest ones are water/sewer, any utility bills you pay such as outside lighting, trash, real estate taxes, insurance, 5 to 10% vacancy factor (even if your 100% full now), management fee for yourself.
Everyone thinks they can cut expenses to the bone, but you really can’t. Here is some stuff I have had to pay for over the years- culvert replacement, connector pipe underground broke, junking a unit costs about 1200, new skirting, electric update, relevel a unit, new windows, etc.
A once a month visit is sufficient unless you have a turnaround situation or a lot of work that needs to be done.
With a 29,400 annual income… i would say 150k is a good ballpark for the top price you can pay. You got to have a positive cashflow in order to justify the risk of buying. I knew of a big investor that really liked Indiana - he owned quite a few larger parks in northern indiana and still does. Some of his real estate tax bills TRIPLED in one year due to reassessment, 12k to 40k is a huge hit. I would check that out for sure.
I’m actually looking for another park also- havent bought any property in 3 years and I am getting the itch to buy. Have you seen anything promising in indiana or are you running across overpriced junk like me? I saw an interesting deal thru Rich Correll- he had a 20 lot park in Sullivan, IN that sold for under 100k. Thats exactly the type of deal I am looking for because right now there is a huge glut of cheap, newer units in my area. You can update an older park by moving in newer units and getting rid of the 1960s and 1970’s homes. Obviously this takes a lot of money, but if you buy the park cheap its a very good strategy