The following proforma spread sheet shows a 6 year investment result for a New Mobile Home Park Development with the following Assumption. It is based on a typical deal: 8% preferred return, unpaid preferred return are accrued to investors account, non-compounding. Preferred return began to be paid when the property’s cash flow allow. Accrued interest on investor account balances are paid first before the sponsor participates in the profits. The sponsor may also be an equity investor and would be treated just like other equity investors in that capacity.
For these projections the following assumptions are made:
- Minimum Park size is 150 rental spaces
- Development cost of $5,000,000
- Holding period 5-7 years
- $2,000,000 equity investment
- Leveraged at 60%
- Interest rate of 7%
- Negative cash flow is financed as part of development cost.
- Sale at end of year 5 or 6
- 8% Cap Rate
- Higher development cost could increase the amount of borrowed capital needed.
- 3% rental rate increases beyond year 5 will have some positive impact on returns.
- Sale at a lower cap rate could have a large impact on potential profits from a sale.
- Expansion of the park would have a positive impact on Cash flow and sale proceeds.
- Refinancing of the park could return investors equity investment while retaining the annal cash flow at a some what reduced rate because of the added debt
Each park is a separate entity if the Private Place Memorandum or Other offering materials for the deal your are considering with our company does not have accrued preferred interest provision an addendum will be submitted for that purpose.