Posted by ray@lcorn on November 05, 2000 at 22:37:19:
TK,
Great question with an easy answer.
Assuming the terms, income and expense stated, you will be spending $12,500 down (plus the cost of a new septic field ~$2500?), and receive net operating income of ~$6,000. Annual debt service on $37,500, 15 yrs @10.5% would equal ~$4,975. That leaves net cash flow of ~$1,025, or an 8.2% return on the down payment funds, without accounting for the new septic field.
If you’re only making 50% returns on your Lonnie deals, to replace it would require a cap rate of 22.4%. With an NOI of $6,000, that means it’s worth ~$26,785, less deferred maintenance expenses.
Tell the realtor to go take a course in appraisal before they do real damage to the sellers. (just kidding, but the seller should know that is way overpriced.)
General info: 1-Drilled well supplies all mobiles(no meters)
each mobile has own septic system, tank and all (one leach field needs replacing)
1.4 acres (no expansion allowed)
No house with park just pads
Park assessed value $38,500
Asking Price: $49,900 (realtor admitted to making up price based on lack of experience with parks and no viable comps)
Owner willing to finance with 25% down up to 15 yrs. at fair market interest rate.
At what price\structure can this park make sense?
If we were to purchase this park (like our lonnie deals) it would be purchased through our self directed Roth IRA
With just some preliminary number crunching it seems like my money would work harder and smarter with traditional lonnie deals for now. Could somebody with experience in this area please educate me.