Backstory:
My spouse and I have been going back and forth with the sellers of a mobile home park now for about half a year. The owners of the park were an older couple until the husband passed away unexpectedly. Now the sole owner is overwhelmed and anxious to sell and retire. The owners kept all of there notes on notebook paper in folders and always showed a loss on their taxes. They also collect only cash and pay the property manager only in cash.
The deal:
2 separate 5 acre parcels (not contiguous, but on the same road and on the same well).
One 5 acre tract has a small, very old house and 10 older mobile homes (1 belongs to the on-site, long-term property manager). Each home sits on about 1/2 acre. There are 3 septics that service the entire property (the way the owner described them seemed adequate, but there is no record of the septic field with the County Health Department).
The home and mobiles are all rented currently, and at any given time, probably 8 out of the 10 are rented.
The other 5 acres has a 1500 sq ft 3 bed, 1 bath SF home in good repair with a 2100 sq ft metal shop (also in good repair) and then has 3 mobile homes separated a good ways from the house and on their own septics.
All of the properties currently get their water from a well that is on the 5 acres with the 1500 sq ft home and shop. City water is at the street and could be connected in the future. There is no sewer in the town or close enough in the next town over to make it feasible yet, but there is a new highway being constructed at the edge of this town that has everyone oozing with expectation (less than a mile from this property). This particular town has been outside of the radar, but the towns around it are EXPLODING! People are just starting to buy up the property that has been on the market for a while and now there is almost nothing for sale here in this town.
We have offered the owner $340k total for everything:
$10k down, $240k in bank financing, and $90k in owner 2nd position financing.
[The bank is offering a 5 year fixed ARM with balloon, on a 15 year amortization, 4.9%and we've talked the owner into a 15 year am with a balloon payment in 5 years on the 90k, 4%.]
With our low DP and bank terms amortized on the 15 year note, we are only projecting a cash flow of about $470 or if we can talk the owner into a 30 year amortization to base the monthly payment off of then it would be around $710.
14 units would be under our care, some with some deferred maintenance (exterior painting and leaking roofs), and one shop building.
We could potentially add more units, at least a couple more, but to add a significant number would require a complete overhaul of the septic systems (I don't know a lot about that yet) or eventually connect to a sewer.
With all the moving parts and the potential for big headaches, I'm not sure the current cash flow can justify the investment.
We originally envisioned allowing the property to pay itself off and building apartments in the future when sewer comes to town, but we're still nervous this property may suck the life out of our souls.
Deal or No Deal?
[10k is all that we have at the moment to put down, and while the seller might be willing to finance more, we are not sure we could refinance at the end of the term or come up with more than 90k to meet the balloon payment. She is in poor health and would not likely be willing to owner finance the entire thing. ]
