Hi, I need your help. I am new at this. I am interested in buying this mobile park. I will most likely finance 80%. It has 33 lots with 20 mobile homes. The asking price is $695,000.00 The numbers they gave me are as follows:
Average rent is $400-$450 per month
Lot rent is $150 per month
Total Income $135,480.00
Expenses:
Taxes $2,249.00
Insurance $2,700.00
R & M $10,000.00
Utilities $1,850.00
Vacancy Rate $3,275.00
Total Expenses $20,074.00
NOI $115,406
How do I determine the value of the property? What’s a reasonable offer?
Determining value is really dependent on you. No two investors will value a property exactly alike. What return do you want (or what is your personal cap rate)?
Then your max. purchase price should be NOI/cap rate.
In your post you don’t allocate anything for debt service. How much is your 80% loan going to cost you per year?
Patti Porter
You need to have a good appraisal and market consultant for the area who can value the property for you so you can tie in your personal financials to see if it is viable for you. Make sure you get protection in your purchase and sale agreement and add up your closing costs. Many people come to closing foregetting to add these and do not prepare for them. Commmercial property especially has a number of extra special need and costs that go along with closing. You also need to consider your ongoing maintenance costs and management. Attorneys and accounts are helpful and save you a bundle in headaches in the long run. Certainly seek professional help.
Good luck to you.
Thanks for replying. I looked at the numbers again. the deal will not work because the debt service will be close to $7900 per month.