Top Numbers A Mobile Home Park Investor Needs To Know

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# Top Numbers A Mobile Home Park Investor Needs To Know - PowerPoint PPT Presentation

There are many, many numbers thrown around in the real estate investment arena. Here are ten that mobile home park investors need to know for each potential investment.

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Presentation Transcript
TOP NUMBERS A MOBILE HOME

PARK INVESTOR NEEDS TO KNOW

There are many, many numbers thrown around in the real

estate investment arena. Here are ten that mobile home

park investors need to know for each potential

investment.

WHAT NUMBERS DO YOU NEED TO KNOW TO MAKE GREAT

MOBILE HOME PARK INVESTMENTS?

1. CASH ON CASH RETURNS

Cash on cash returns are important numbers for

mobile home park investors. While this figure may

depend on many of the others below, it shows what

your actual cash return is. This figure can then be

used to compare investment options. To find the

cash on cash return, divide your annual before tax

income by the actual amount of cash you plan to

invest.

2. CAP RATE

Capitalization rate is commonly used to compare commercial real

estate investment opportunities. The cap rate is derived by dividing

the annual net operating income (NOI) by the value of the property. So

a \$1M property with a\$100k annual NOI has a cap rate of 10%. This is

the equivalent to price-to-earning ratios in the stock market. However,

note that the true cap rates change over time. The income ought to go

up, and so should the property value. Investors often forget this. The

result is a far poorer cap rate in the future due to substantial captive

equity. For example, if your property value goes to \$2M, and your

income stays the same you now only have a 5%cap rate. Tap this

equity and expand to keep your capital and investments performing

better for you.

3. CASH FLOW

How much cash flow will this property actually

produce? Gross and net. There can be a big

difference. Big gross numbers mean nothing if

there is negative net cash flow. However, there can

be advantages to high gross numbers. This can act

as a nice float during the year.

4. LTV

What loan to value can you borrow against this property? What

LTV will you be able to refinance at? What LTV can future

borrowers expect to achieve? How will that impact the resale

buyer pool available or potential need to offer seller financing?

4. LTV

5. NUMBER OF UNITS

How many units or lots are in a given mobile home park?

This can impact consistency of income. Also consider if there

is room to add more units.

6. PER UNIT RENT

How much is the rent and income per unit, door, or lot? How

does this compare to other options in the area?

7. UTILITIES

What utilities are to be provided? Who pays them? How much

are they? This will impact your bottom line.

8. TAXES

How much are the property taxes? How much are

they likely to go up? What can you do to minimize

property taxes? Then there are income taxes. How

will the returns from this mobile home park impact

your overall tax burden? How can you minimize

that and turn it into a positive? How much will you

really net after taxes?

9. LOCAL UNEMPLOYMENT

What are local unemployment rates like? How does

this compare to other locations? Mobile home parks

can benefit from serving lower income housing

needs, but if people don’t have income it doesn’t

matter how cheap the rent is.

10. LOCAL VACANCY RATES

What are local vacancy rates for rentals and other

mobile home parks? How many units or lots are

vacant or are going vacant in this park? Build this

number in as an allowance to ensure you stay in

positive cash flow territory.

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