Structuring Tips Needed For Mobile Home Park
Hello all,
I am in negotiation with the owner of the park to buy into half of the park. I am trying to figure out the best way to do this and how to do it with little to no $ out of my pocket (I dont have it so...). The purchase price is way undervalued...less than 70% using income approach. It has been suggested to get the owner to carry a note and then go get a refi...maybe? Any other suggestions for structuring the deal to begin with and then how to get the needed funds. TIA
I am sorry, I do not understand what "structured annuities" would have to do with this particular deal. Can you explain a little more?
An annuity is essentially a level stream of cash flows for a fixed period of time.
Most investors realize the value of selling a level stream of cash flows for less then the income streams value.
Many investors create a simple "pro forma" statement based on cash flows on a particular investment property in order to sell the income to another investor for a small chunk of what it is worth.
(It is just one of the many possible avenues you could take)
I hope that helps.
I reccomend this cash flow analyzer.
w w w . r e a l e s t a t e t o o l . n e t
[ Edited by dwilson2 on Date 04/26/2005 ]
Ok, so step one to answering your question is to get the information into the standard pro-forma operating statement form:
Income:
x number of apartments at $y rent per month = $zzzz monthly income
less vacancy/deliquency factor (usually between 5% and 10%)
time 12 = gross annual income
Expenses
broken down by line items reported annually..
not including the mortgage
But including property taxes and Insurance
annual inome minus annual expenses equals annual NOI
With this information we could begin to give you some advice about the deal.
Thanks in advance for the help. I hope I have broke it down right. It is an 8 unit complex all brick with minor painting or upkeep on outside. Built 1963 large one bedrooms.
By realtor advice and my own knowledge, I own a duplex blocks away, the rents could be eased up and raise to $395 to $400 in a year. There is a community college one block away and a hospital 4 block away.
This is an 8plex apt. bldg. It breaks down as
8 units @$350=$2800
-10% vacancy =$280= $2520 mo
$2520 x 12 = $30240 annual
Expenses
water $250 x 12 =$3000
trash $35 x 12 = $420
taxes $147 x 12= $1774
insurance $125x12=$1500
Total expenses = $6694
NOI $23546
The asking price is $240K. I am offering $210K and have not been countered as yet. Any advice on this would be appreciated and how far to go if I have to counter and still make good cash flow... Thanks
From what you are saying commercial, an offer of 200k might be more appropriate, that would be 10 times the NOI if you add the maintainence fees of 100 per month per unit. Is that right?
Commercialking,
I thought at seven times, we were suppose to come get YOU!?
LOL
Larry
Thanks everybody for all your input. I am waiting back to see if my offer has been accepted. And no I had not written maintenance but have taken it into consideration. If all works well, I plan on keeping this. Good area for rental...close to hospital and community college. There is no grass, very little maintenance upkeep to building, only occasional snow removal per year. Only twice this year and only minor painting, building is brick.
Yeah, Robert but toilets break and apartments have to be painted and kitchen sinks plug up and roofs leak and the driveway has to be repaived.
I figure somewhere between $50 and $100 per unit per month for such things.
CommercialKing
Then are you saying with adding $50-$100 per unit then this place is probably only worth about $185. What do you think
Thanks
Quote:
On 2005-04-01 23:15, roberth wrote:
Income properties are figured a little differently, the Debt service coverage ratio is what the lender will be looking at. The DSCR is the net operating income divided by the total debt service...
If you figure out what your DSCR is then you can figure out how much a lender will borrow on this property.
Good luck,
Robert
Hey, Robert!
Could you elaborate on this point a little, please?
How does the lender use this ratio? A higher ratio gets a lower rate? Or is there more to it?
Thanks,
Big Al