Posted by Dr. Craig Whisler CA NV on September 25, 2003 at 15:01:39:
…that there is often more to them than meets the eye. See details below about Ray Alcorn.
This deal sounds fine, so far.
Forget the appraisal. It can only hurt you if it comes in high and he raises his price. Do your own appraisal or get some private advice from someone competent to value smallmobile home parks. Don’t let the seller know of this unless your apraisal comes in low. In that case show it to him and try to use it as a bargaining tool, to wrangle further price concessions from him.
I would talk to all of the park residents and ask a lot of questions like “is there anything wrong with this park, its management, or the neighborhood?”
Are there separate electric, gas, and water meters? Is it on city sewers? If not is the septic system ok?
You should have every agent in town falling all over themselves to represent you and that includes the selling agent if it is legal for him to do so in that state. I think it would be best to get the selling agent to represent you if possible because if he gets a double commission he may work harder to put this deal together.
Two more important questions were left unasked:
How will you manage this park effectively from 2,000 miles away? These small parks are generally management intensive even when well managed, and you can’t afford a full time competent manager on this amount of gross income.
Can you get seller financing? This is probably more important than any other consideration. My general rule is, if commercial lenders won’t finance it then the seller will have to. I certainly won’t. I don’t want to get into anything that I can’t get out of without financing it myself, if I can help it. An exception might be if I got a super price. Tell the seller that all cash deals are very rare in situations like this, and since lenders won’t finance them, he will have to. Ask for good seller financing at low or no interest. I bet he would accept $75k cash after thinking about it for a year or so if no other buyers materialize, or $100k with 20% down, and he carries the balance for 10-15 years at 6% or less.
Nothing is carved in stone. The longer the place has been for sale the more flexible the seller may be. Find out how long it has been listed for sale.
Read all of Ray Alcorn’s books. They should be available on this website. They should give you enough additional information to either, make you, or save you, THOUSANDS of dollars. Don’t be penny-wise and pound-foolish. Get the books right away and read them BEFORE proceeding any further.