Posted by Travis on October 15, 2003 at 07:48:33:
The gentlemen that I was working with for a few months had lots of money but not the experience after 7 months of negotiations the deal fell apart. As for the owner financing, I could do some which is what I figured, atleast hold enough so that someone or an entitiy could get financing. Thanks for your reply
Park for sale near Charlotte, NC - Posted by Travis
Posted by Travis on October 12, 2003 at 21:56:19:
I have a ten unit park for sale in Concord, NC, I am having problems finding financing for interested parties. 10 units owned by my corp. along with 1.87 acres. The price is 298,000 and it brings in $400 per unit. It has a nice cash flow. Can someone tell me who might possibly finance these 10 trailers with land.
Thanks,
Travis
Re: Park for sale near Charlotte, NC - Posted by Gregory
Posted by Gregory on October 17, 2003 at 14:22:14:
I think the problem is there in not enough profit in it for the average investor.
Let’s run some numbers:
Asking: $298K
Gross Revenue: $48k/yr (assuming 100% occupancy)
Expenses: $26.4K/yr (This includes Taxes, Insurance, Maintenance, Turnover, etc, 45% is the Rental Industry Average).
Mortgage: $18.4K/yr (Assuming 70% LTV, 8%, 30 yrs).
Pre-Tax Revenues: $3.2K
Taxes (32%): $1K
Profit: $2.2K
ROI: 2.5%
If you want the park to move you’re probably going to have to come down on the price a bit. A selling price of $250k raises ROI to 5.6%, $220k raises ROI to 8.25%. I think the best chance of getting an investor to bite, and a bank to finance would be somewhere around $200-230K.
Re: Park for sale near Charlotte, NC - Posted by Tom(WA)
Posted by Tom(WA) on October 14, 2003 at 13:33:32:
Travis, most of the readers on this site know what they would pay for these older homes and it’s not much. You need to separate the value of the homes and the value of the park. Take the income from the space rental, deduct your expenses including management and see what your honest cash flow is from these spaces. How much would an informed investor pay for this cash flow? Then how much would an informed investor pay for the homes? My guess is that the total is much less than $298,000. You might find that a good approach is to sell the homes on terms - a.k.a. Lonnie’s Deals, and eliminate a big part of the head aches and sell the park without the homes.
Tom
Re: Park for sale near Charlotte, NC - Posted by Tony-VA/NC
Posted by Tony-VA/NC on October 13, 2003 at 16:53:37:
How did you arive at that price? That may be where the problem lies.
Tony
what do you consider… - Posted by Greg Meade
Posted by Greg Meade on October 13, 2003 at 15:42:48:
good cash flow? The way i fig this is 48k total rev. Expenses say 30% or 14.5 so 33.5 noi. Or 11% return.I would not want to tie up that kind of money for that type of return…would you? Could this be part of the problem in finding a lender? Has this Park been appraised? That would help with lender. Please post a response, i am very interested as i have a small park for sale now also!Greg
Re: Park for sale near Charlotte, NC - Posted by Travis
Posted by Travis on October 15, 2003 at 07:55:59:
In the evalutions that I have used the banks have figured that the land alone is worth between $210,000 and $220,000. The trailers aren’t going to be worth much but this is where some owner financing comes in, I would be willing to hold 20% if someone can get the loan, secured by the property. It would be nice if the income approach would work with this property.
Re: Park for sale near Charlotte, NC - Posted by Travis
Posted by Travis on October 13, 2003 at 21:45:33:
Well that’s what I’m wondering, @ the price I am asking the cap rate is between 16 and 17. Thats a great return but at the same time people think there are problems with the property. I rarely have any problems. I have all Latino tenants, they take great care of the property and I never have any problems collecting rent. The trailers are older, I have 2 68’, 4 78 to 81 and the remainder are 84 and above. One main issue is the banks aren’t giving any money for the trailers just the land. They told me that they will loan on the land only this was several banks. So I went to one of the local banks in my area the gentleman I spoke with is the head of the commercial division, from the income approach he said the property should come in around 350,000. Before I take another investor into any bank I want to know exactly what I need. My last package I sent had every expense, etc. I thought I covered all bases but it looks like I didn’t. Thanks for your reply.
Re: Park for sale near Charlotte, NC - Posted by Gregory
Posted by Gregory on October 17, 2003 at 14:34:20:
“In the evalutions that I have used the banks have figured that the land alone is worth between $210,000 and $220,000.”
Here’s the catch, the land with the mobiles could actually be worth less than the land without the mobiles. Think about it . . . how much would it cost to remove 10 Mobiles from the land? Subtract at least that amount from the land appraisal and you are probably closer to the true market value of the land.
The way I see it you would have two people looking at your property; one who wants to develop it, the other wants the cash flow from the mobiles.
The one who wants to develop it looks at the MH’s as a Liability, they would have to remove the MH’s along with any sewer and electric that is in place. They would probably want a discount on the land price to offset this cost.
The investor who wants the cash flow from the MH’s is going to want a nice return for his money. There can be a lot of risk with finding tenants, getting rent, evicting bad tenants, etc, etc. He is going to want a nice, high ROI to justify the risk.
The Bank is going to want to have their money secured. They probably feel that $300k is too much which is why you are having problems getting anyone financed.
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?