Posted by ray@lcorn on December 13, 1999 at 23:45:45:
Alex,
I apologize for the oversight. Your post came on board while I was on vacation, and I hadn?t gotten that far along in cleaning out my inbox yet (over a hundred messages to still answer) Right now I?m working on a priority system that utilizes the amplified shrill audio incidence, for lubrication to rigid rotational closed-curves ? (the squeaky wheel gets the oil) 
First, I want to make sure that we are talking about the same park? I have details on a 15 space park that includes 15(?) homes in Irons, MI, with another acre of land . Right one? I hope so, because we need to repost the particulars for everyone to follow along:
Your description:
15 acre park with an additional 1 acre across the main road. 15 lots, approximately 3/4 acre sites, road and common area. 10 units occupied, total average income= $3,600.00/month. 11th lot used for boat
and trailer storage(lot set up for MH). 4 lots left to develop, 2 of which have well and electric. Rent hasn’t been raised in three years. Ten homes rented for $360 each per month which includes the space, one space rented out for boat/RV storage, and an existing land contract ($129k, $1,500.00 @ 10%, 202mths) that could be assumed because the current owners are divorcing. The asking price is $205T. The tenants pay their own utilities, and the park pays maintenance on the homes ($600 per year) and the park (no figure given), insurance, taxes, and trash pick-up (dumpster). Gross: $43,200 NOI $23,636. There is a third party that wants to manage it for you, on terms unknown.
My thoughts:
It is possible to get all hung up here in what the value of the park vs. the value of the homes, and if the expenses are really $18T per year, etc., etc. But the real question comes down to valuing the cash flow. In short, the property has a stream of income, and it is worth something. How much it?s worth, and how you determine that, is why folks write books.
In my book (pun intended), on a deal like this which is almost a distress sale (and if you?ve ever been through a divorce, you know exactly what I mean) I tend to size up the operation rather quickly, and make an offer based on what has been presented, subject to that being proved true. I know going in that either party will lie to get the marriage issues settled, and that they will also take less than they think it is worth if it allows everyone to walk away whole. My mission is to buy way below market to allow for the probable false info, and provide an upside to a deal that I wouldn?t do otherwise.
On the fly, I would hit a small park with homes (I don?t like park owned homes) in the 15%-18% cap rate range. I would then deduct a management fee from the NOI of a little over market rate, say 7% if the market is 5%, and then just do the math. NOI $24T- $3T mgmt fee = NOI $21T divided by 15% = maximum $140T sales price, $117T minimum. In other words, Its worth about the amount they owe. That will probably make someone mad, but that?s what it?s worth to me on a good day. If you really think there is an opportunity here, then offer to pay them a couple of grand walkaway money and assume the Land Contract.
If I missed something, let me know.
Good luck!
ray