All Forum Posts by: Howard Abell

First you need financials that you can have some faith in. Caps rate based on NOI so view the expenses critically. Verify income. Typical Due diligence issues. If you pay 5.5% cap rate you need your cost of money to be at least 1.5 to 2% below that to have a shot at making money over time. Better to have 4+ spread for safety.

No such thing as normal/average cap rate for mobile home parks. I would say though that a range for land lease only parks would be 8-12% caps. Park owned homes push the cap rate up from 10 to whatever the market will bear. Most probably sell from 12 to 20% caps depending on all the important factors. Water, sewer, underground utilities, age of homes, paved roads, etc. Sorry I can't give more but it is a fluid part of pricing.

tI applies to your plan to sell and finance the homes. 

You need to do more reading on this subject. Lonnie Deal financing will get you in a heap of trouble. Look up Dodd-Frank on BP and catch up before moving forward.

The best advise you have been getting is to cut your loss, refund her money and get to getting another tenant sooner rather than later. It can't be the $250 you need but maybe your ego needs to be massaged. You are in business and you have a disgruntled customer. How would you like the service if Walmart told you you can't get out of your purchase unless you ate half the cost?

The consequences of the Dodd-Frank law is like trying to kill a roach with a hammer. The collateral damage is not worth it. 

I'm a cap rate guy myself. I would use the 300 times 11 = 3300/Mo and 39,600 for the year and subtract an expense number say 40%. This gives 23 760. Park owned homes deserve a cap above 10% IMHO and you can adjust to this such as public sewer and water, metered or not, etc. If you use a 13% cap for example you get a value of 182,700. For me this park is way overvalued. 

I understand all the replies to your problem and do agree but I have an alternative approach here. You already are carrying a loss on the townhome and waiting to what appears to be a break even in both cash flow and in two years a sale may not be your only option. The 10 to 15% loss is not earth shattering and there is much to be said for getting out of this situation and moving on. You can clean up your balance sheet, start saving money over the next two years and be in a position to begin a profitable investment program. Sometimes taking a loss is more psychological and emotional and prevents people from viewing all their options. Just a thought. 

You don't mention the value of the land alone. Do you know the comps in the area for the land. If the land is worth more than 55K and the zoning gives you plenty of options than you might be able to start to think about trailer values. A trailer in rough shape where I am located goes for under 5K. Then you need to rehab it which could be another 5K or more. It  is true yours is in place but at those rental rates your margins would be tight for a MH investment. 

It could be an advantage for you to go in together. You may find that the manager relates to one of you more than the other and you should be aware of that. Also the manager might be a woman and could relate to you or your husband differently. I would not automatically assume that a woman would relate to a woman, however having both of you visit gives you the opportunity to develop that relationship.