Cashflow opinion

[Terry Drake]

I'm currently working on a deal for a mobile home on land (real property).

I was anticipating about $250-300/month cash flow. (financed through the bank, 10yr terms). Well due to the appraisal (bank being ultra conservative) I was going to walk away from the deal for the fact that I would have to come to the closing table with too much money which would shoot my ROI all to hell.

I told the sellers agent that the only way I can move forward with this deal is if they are willing to owner finance it. Here are the terms and details.

Property :
1971 Single wide mobile
2 bedroom + 1 office/den area
1.5 bath
12ft x 56
no repairs needed
family park in desirable area
Original contract price : 15k
Appraised @ 12k

I offered 14k if they were willing to hold the paper. They came back with the terms of

14k selling price, 3k down leaves a balance of 11k.

11k over 5yrs will cash flow about $175/month after PITI and after 10% of gross rent for Misc.

Obviously that is well below the numbers I was hoping for. I don't want to jump into a bad deal, but at the same time I don't want to walk away from a good one. Especially if I'm being hoggish about it.

Would you guys be happy with 150-175 CF/month or is it not worth the headache? I try to shoot for $200/month. Especially with an older property that can have appliances or other problems at anytime.

What are your thoughts/opinions on this deal?

[Peter Giardini]

Terry... you greatly underestimated your "misc" expenses. They should be at least 25% of the gross rent... and if the furnance or lot rent or anything else is old or out of the ordinary your expenses will only go up.

You are probably looking at cash flow of less then $100.00 per month.

The key here is just because the seller will carry the financing doesn't mean it is a good deal. In fact it may be a terrible deal hidden the in the excitement of seller financing.

Best of luck!