New investor with questions on a deal. Am I missing something?

[Jason Vaughn]

Sorry from all Caps but #'s from seller. 

INCOME

UNITS YEARLY RENTS 15 units @ 7185 mo 86,220

VACANCY 5% = 4311

TAXES 2135

MANAGER 2400

INSURANCE 1267

WATER/SEWER

GAS/ELECTRIC 2818

GARBAGE 3694

MAINTENANCE/REPAIRS 1057

TOTAL EXPENSES 13,371 +VACANCY 4311 = 17682

NET INCOME 68,538 

Asking $595,000 as listed based on sellers #'s it is a 11.51% Cap Rate expenses seem a low though

Few things of note.

1. Management is only $200 a month. Per agent there is an onsite resident manger/maintenance. Still seems a little low though

2. No water/ Sewer because it is on well and septic. Is there a amount that could be billed to tenants for well/ septic repair/ maintenance? or just account for as part of rent as cap ex?

3. Electric is paid by all but 2 units. Not sure why not all units pay electric  

4. No CAP Expense listed. With septic how much should I account for? 5-10%?

5. All Home are tenant owned and that is where things get interesting. The homes are all on seller finance contracts with a total of 100,281 for 7 yrs @ 8%  =1531 mo or 18,372 yr until paid off. These contracts are included in the sell.

6. Seller is willing to do a small 2nd mortgage as seller finance.

7. Rents seem to be pretty close to market average so not much room to increase income. Maybe able to get last 2 units paying there own electric and maybe individually bill garbage but not sure.  

I am interested in the deal but thinking a little over priced based on low expenses. My thought is calculate based of 40% expense for cap ex and other unforeseen/ undisclosed expenses. They had it listed as a 10% cap but not sure how they came with that #, with increased expenses at a 10% Cap I am coming up with 505k. Although most I see in this area are offered around 7-8% and this would be 9%

Also How would I account for the amount for the contracts? Price the park then add the mount for contracts? I have heard most note buyers buy at a discount. Not sure if same would apply here. Would any note buyers want to just buy the batch as a whole if I were to purchase this deal? 

I would need seller financing to make this happen so note sure if it would be best to negotiate off the selling price, negotiate off the notes, or focus on best seller finance terms.

Thanks Jason