Small MF deal just locked up!!

[Dave Rav]

Hey fellow BP folks! I am excited as I just locked up a small MF deal in Columbia, SC. Came across the deal on the MLS by happenstance and couldn't believe the numbers. At a cursory glance, the conservative cap rate is at least 7-8%.

Purchase price $168k.  

Price per unit is $42k, which is pretty good in my opinion.  Now, I do need to mention the types of properties we have here.  There are (1) stick built home and (3) MHs.  Additionally, there is a 5th unit but I was unable to confirm occupancy permits, legality, and proper zoning of this structure - therefore I am NOT counting this in my analysis. 

100% rented (I will be getting leases to prove this)

Utilities- septic (definitely not excited about this, and you better believe I will do my diligence here)

Value add opportunities - Increase rents by minor upgrades on at least 1-2 units.  Add storage (boat, camper, RV space rent).  Get that 5th dwelling an occupancy permit and rent it for at least $550-650/month conservatively.

Purchase method: Unsecured business LOC + bank financing. I have spoken to a local bank the loan officer says they are ok with loaning up to 80% LTV, even if my 20% comes from another source of credit (LOC)! I thought this was amazing, as typically they want to see "your own cash" in the deal as skin in the game. I explicitly told them I would use an LOC for the DP and they said "ok". Pretty neat.

I am certain there are more details folks may want, but I'm going to leave it here for now.  We can always further the discussion in the comments.  Your feedback is appreciated!

[Frank Rolfe]

I'm sure you know the drill, but the standard way to value this is (4 lots x $250) + 600 x 12 x .5 = 9,600 which at a cap rate of 10% is $96,000 plus the value of the three mobile homes (maybe $5,000 each based on age and condition) = $111,000. And that does not even include the risk of the park being on septic. 

I think you have to re-negotiate this down to $100,000 or so for it to make sense, and even then you are going to have to really get a handle on the septic and other cap-x items as you have no fluff even at that price.

To give you a comp, I bought a 15 space park at the same lot rent -- plus a 3/2 stick-built house -- for $65,000. And it was on city water/sewer. And in a metro of 5 million people.

On little parks like this, you have to have PLENTY of room in those numbers for bad news to unfold without going upside down in the deal.

JUST TRYING TO KEEP YOU OUT OF TROUBLE.