All Forum Posts by: Howard Abell

@Account Closed You are partially correct. The NOI gets you the cap rate of the specific property by dividing NOI by price. However, Market Cap rate is in the eye (or spreadsheet) of the beholder. It's a moving target.

You haven't given enough information to value the deal. Try thinking of these in sequence. What are the Gross revenue numbers, the expenses including taxes, a vacancy rate. Subtract expenses and vacancy rate from Gross Revenue to get to Net operating income before debt service. The NOI is a number used to get a cap rate. NOI minus debt service will get you to cash flow.

I have used a quick and dirty formula to access weather I will move forward. That is does the unleveraged cash flow equal a minimum of 10% return.  this seems to give a working number to start. 

Anyway get the numbers together and this forum could help you.

There is not enough of the pertinent information to tell you if this is a good deal or not. However from your questions about debt service and DSCR, etc I can only suggest that you find a competent commercial real estate broker and have him/her represent you in this deal. If the seller will not pay a commission for your representation then you will find it cheaper paying him/her yourself then trying to do this deal by unrepresented.

@Account Closed nice

@Shaun Palmer I own a MHP in Lillington, NC about 40 miles south of Raleigh. I am offering rehabbed homes for $12-14,000, 3 br, 2 bath. Our rentals go for 600 month. Do the math on this and the ROI is about 18-20 percent. I would be happy to send information if you are interested.

Yes, I think you are closer to value than they are. Good Luck

You have not mentioned the asking price. A very rough estimate of the NOI using your numbers seem to be just under 6K. I used a 30% expense ratio. Next step is to figure cap rate which depends on local knowledge and value of land and other assets.

Just a quick look with no pencil.

Using multifamily investment I can get you close to 300K not counting any appreciation in the real estate.  It may be more but I did not figure the amortization. 

Yes, mobile homes may depreciate over time but if taken care of, not as much as you might think. Mobile homes can give you a very good return on your investment (ROI). Also it is a more attainable investment at lower price points than alternatives. You should familiarize yourself with the concept of Internal Rate of Return (IRR) which will tell you what your ultimate return on the investment would be taking into consideration any potential depreciation. It is possible to get a great return even though the value of your home may be 20 or 30 or more percent less in value in 5 or 10 years. I do not believe it is always a case that there is depreciation. Much depends on area and demand at the time you decide to sell.

You need to learn more about the nature of this kind of property. Expenses are more than you estimate, turnovers cost you more, non payment is usually an issue, etc. That is why the margin looks so high. This is not the type of property you want to go to school on. Property management is difficult.  

I know the NOI looks great but it can be elusive. These properties should sell for 25-30,000 per door or lower from what I think the area is from your simple description.