Re: Park for sale near Charlotte, NC - Posted by Tony-VA/NC
Posted by Tony-VA/NC on October 13, 2003 at 22:36:53:
Banks are going to go with appraisals by companies or individuals they trust and do a fair amount of business with.
These appraisals I have seen have included 3 valuations. Income method as you indicate, a value of the real estate and homes (separate), and something like a replacement value (sorry, I am a bit tired and better wording escapes me at the moment).
This is likely where your park is drawing concerns. Banks acknowledge the fact that mobile home parks are cash cows but they have no interest in running them. Banks know that the minute the investor stops running that park correctly, the income dies and if that were the only valuation, their equity dies with it.
Your mention that some of the homes are late 60’ models. The appraiser (and bank) may have used a 15 years life expectancy (at least the ones I read did). That puts the homes at no value. (One reason I don’t care for such evaluation by investors).
Your land has less than 2 acres for 10 homes. That land may not carry enough value alone to support the price.
The bank begins to see something like this. Less than two acres, occupied by old, old trailers that somehow put out a nice cash flow so long as the investor is there.
It would seem natural that they would next look to the investor (your buyer). What experience do they have? What kind of income (independent from the park) do they have? What kind of credit? What other assets, net worth etc…
This small park may be drawing newer investors who see the nice cash flow but do not have a proven record with such properties; do not have established banking relationships (with lenders); do not have 20% or better in cash to put down to entice the bank etc.
Parks like this will often require owner financing if you intend to seek full asking price. Is such an arrangment possible based upon your current, underlying financing?