Buyer’s Guide

Frequently Asked Questions

Can You Explain Real Estate Terminology?

Capitalization Rate: The property’s net income divided by the purchase price, or the interest rate return if you paid cash for the property.

Net Income: Gross income less operating expenses.

Cash Flow: Net income less debt service (mortgage payments).

Cash on Cash Rate: Cash flow divided by down payment or the interest rate realized on cash invested.

Profit: Cash flow plus principal paid off the mortgage over the first year.

Yield: Profit divided by down payment.

Can you explain your property listings?

The information in our listings is provided to let buyers see what opportunities exist. We understand your desire to learn more, and we invite you to contact us for more information about each property listings.

Our property listings describe return as Capitalization Rate, Cash On Cash Rate, and Yield. Use these numbers to evaluate investments, while making sure income comparisons from different sources use the same criteria.

Return rates tell only the story of the past or present, and not the future and may reflect current management’s ability rather than property potential.

Generally, the market pays more (reduces return) for higher quality properties and those with high potential, and it pays less (enhances return) for lower quality or reduced future potential.

Return rates can help evaluate financing structure.

Cash on Cash rate substantially higher than cap rate indicates some combination of low down payment, low interest rate or extended mortgage term.

Usually the Yield return will be very close to Cash on Cash.

Cash on Cash rates near cap rates indicate shorter term or higher rate mortgages and when accompanied by a fat yield rate indicate investment structure suited to investors interested in rapid wealth (estate) building at the expense of cash flow.

What’s so great about manufactured/mobile home parks, RV resorts & Campgrounds

Parks are easily managed because you rent only the land.  The living unit is owned and maintained by the tenant, at his expense. Smaller parks might be easily managed by an owner or management team of two. Maintenance chores and improvement projects can usually be scheduled around personal time.

Filled communities with established and mature income streams provide extremely safe and secure investments where you can invest your last dollar without a large contingency reserve and expect spendable income within the first of the month.

Most Florida communities cater to snowbirds and retirees; statistically the wealthiest group in the country, and notoriously on time with rents.

Who sells? Why are these for sale?

The adage everything is for sale has been around for years! It’s still true. I’ve seen it happen. Some people think they’ll never be interested in selling, but when the right conditions exist, it’s all for sale.

• Some people have fulfilled their investment goals.
• Others have experienced a change in life that’s no longer conducive to continued ownership.
• Sometimes the seller simply decides they chose inappropriately.

If you own income-producing property and are now seeking a buyer, Fortune Real Estate invites you to contact us.
info@fortunerealestate.com or Phone: 941-755-1339

Click here for a helpful guide on preparing to sell.

Who buys communities and why?

Individual investors and professional management companies buy parks, resorts and communities to realize a greater return on investment than currently available in savings or bonds, with little risk. Primarily, investors invest to receive the property’s income, and secondarily, as a hedge against inflation.

Income property buyers expect the value of their purchase to increase with inflation, with returns on equity multiplied by mortgage leverage.

Having secured the idea financially, buyers enjoy catering to the needs of their guests or residents. The hospitality industry can be a very rewarding career.

Are there tax advantages?

Federal tax deferment through depreciation write-offs is another benefit, and communities may be written off faster than most other forms of property.

Florida has no income tax, and Florida earnings are not taxable in other states.

Is community ownership a vehicle for retirement?

Community ownership is an excellent vehicle for retirement and estate planning. Two examples follow:

• Buy a community at about age 60, then sell at about age 70 when you start to wind down and reclaim your cash invested plus receive a mortgage that brings income until about age 90 to 100.  Work 10 years for the community and let it work twenty or thirty years for you.
• Another plan starts earlier.  Buy a community while still working and let rents pay off the mortgage, producing a tremendous income at retirement time.

Whatever your financial plan, Fortune Real Estate is ready to match your investment goals with a proper property investment to achieve them.  We promise to be honest and frank.

What is a fortune?

A fortune is money kept rather than money made.

Fortunes accumulate as productivity exceeds lifestyle.

Fortunes earn on their own, with little personal effort. These earnings are the time value of money, expressed as interest rate.

Relative risk of a capital sum dictates interest rate. In money transactions no one repays more capital than they borrow, and capital is said to be fixed or static.

In an inflationary economy, money buys less when it is repaid that it did when it was lent.

What is a true interest rate?

True interest rate is the interest rate less the inflation rate. True interest rate is further diminished by taxation on earnings.

At Fortune Real Estate, we plant fortunes by converting your static fortune into a dynamic property investment. As property income rises with inflation it promotes an increase in property value which helps grow your fortune. There always comes a time when you want to do something different with your fortune. That’s when we help harvest your fortune by converting your enhanced fortune back to money, the universal exchange medium.

Fortune Real Estate’s logo symbolizes the motto. Your fortune follows the growth flow of gold coins into the pot of gold at the end. The pot symbolizes capital growth, while the gold coins around the base of the pot symbolize the spendable income produced while your fortune grows.

Why buy in Florida?

Florida has no income tax, and Florida earnings are not taxable in other states.

Fortune Real Estate specializes in manufactured housing resort communities and recreational vehicle parks and campgrounds in Florida because most Florida parks exhibit excellent income stability.

Parks also exhibit ease of management and an outstanding lack of risk when compared to other types of rental property. If you lease a house or apartment and the tenant trashes it, it’s yours to repair, but when renting mobile home or RV lots, your tenant fixes all these things, not you!

Most Florida communities cater to snowbirds and retirees; statistically the wealthiest group in the country, and notoriously on time with rents.

Are fortunes fragile?

Fortunes are fragile with inflation at work:

• A half-million dollar nest egg earning 10% interest will produce $50,000 of income.
• 28% taxation will reduce this to $36,000 spendable.
• Maintaining a $36,000 lifestyle will exhaust capital (means you are dead broke) in just 21 years at 3% inflation or in 16 years at 6%.

Historically Speaking

Mobile home parks have sold for about a 10% capitalization rate for 40 years, but it’s a much different 10%.

• In 1970 we could buy 183 average mobile home spaces for $500,000 cash. Rents then were about $35, expenses about 35%. Net income was $50,000 or 10%.
• From 1970 to 1990 published inflation averaged 6% while park rents and expenses grew at an average 8% rate.
• In 1990 lots in this park rented for $163, producing a net income of $232,600 and a sales value of $2.32 million.
• For the last 20 years, published inflation has averaged about 3%.
• In 2010, average lot rents were $385 and they produced a comparative net income of $550,000 and a sales value of about $5.5 million.

Want to tour a property?

Everybody understands a buyer’s anxiousness when they learn of a new potential property. We are here to help you do things in the proper manner to best achieve the goal of connecting buyers and sellers. It’s imperative you understand the utmost degree of discretion that’s needed when seeing a listed property. It’s so important, matter of fact, that I can’t even sugar coat this article with words like “Please don’t…” so the rules sound harsh as a means of expressing our absolute intention that they be followed. Our sellers and their employees have their hands full, so it’s critical a buyer permit Fortune Real Estate to coordinate a buyer’s visit and tour to ensure the seller is able to dedicate time to lead the tour and that all is handled in the confidential manner that’s required. Many sellers don’t inform anyone else at the business (staff or customers) of the intention to sell. If you even say, “I heard the place is for sale” you could be sounding an alarm. You won’t be the first buyer to wish you could drive through or camp at the business after you’ve learned enough details to locate the property, but we don’t encourage this practice. Arrange your tour through our office!

If, however, you can’t resist the opportunity of a pre-scheduled tour, these rules which must be followed.

• Simply drive through. Do not stop, unless the entrance says you need to register at the office. In that case, ask the office attendant if it’s OK to drive through. You may ask for a site map, but limit your conversation and don’t reveal the reason for your visit. Don’t inquire as to whether the person is the owner.
• Don’t converse with the owner, staff or other guests, outside of a polite greeting. This covers a lot of territory: don’t ask questions, don’t reveal who you, don’t reveal why you’re in the area, and so on. If they attempt to have a conversation with you, such as asking what kind of RV you drive, just respond that you’re just looking around for a friend from up north. Be polite, but be very concise, and leave as soon as you can.
• Don’t go into areas that are for staff and employees only, or that are otherwise marked as limited access.
• Don’t reveal or accidentally display any paperwork or online information that’s been supplied to you as a potential buyer.
• Don’t take a lot of photographs or videos while you’re there. This visit is to simply rule it in or out as a possibility and all further ‘research’ needs to be done at a scheduled time. You will have many opportunities to gather the deeper research on your scheduled tour.
• Limit those in your party to as few as necessary. The larger the party, the more chance something could be said or done that will break one or all of these rules.
• Limit your drive-through to a very small window of time.
• Don’t talk business in the local area. People often know one another, so overhearing your party’s discussion could create new issues for the seller.
• Likewise, don’t talk business with other businesses. For example, you may browse the local grocery store, but don’t discuss business accounts for wholesale purchases. Likewise, you may visit a local bank but don’t discuss their business bank account opportunities or lending practices.

When you have decided that a property is appealing and you would like to learn more, Fortune Real Estate will coordinate your visit with the seller.

What price range can I afford?

As you consider the idea of buying an income-producing property, it’s important you not focus on the sales price but that you focus on the entire sales package:

• Financial Sales Package is comprised of the price, sales structure, terms, down-payment, and the flexibility of the seller in assisting with the financing.
• Operational Sales Package could include the amount of land, equipment list, retail inventory list, current reputation, desire of the buyer to maintain vs evict the former clientele, retention of current employees, location, surrounding area, availability of opportunities to expand operations, and so forth.

With each business you evaluate, a buyer needs to outline at least the following:

• Your available cash
• Expected cash flow of the business
• The sales price
• The amount, if any, the seller is willing to finance
• The amount a bank would need to finance (which involves your net worth; a discussion we’ll discuss in another blog)
• Closing costs
• Start-Up Costs (legal costs, accountant’s fees, legal fees to establish the business, appraisal fees, purchasing of remaining inventory, settling on the prepaid expenses of the business, vehicle registrations & licenses, etc.)
• Possibly franchise fees and franchise training fees
• Landlord lease deposits, utility deposits, and so forth
• Property and liability premiums
• Workers compensation insurance premiums
• Expected costs of operations (salaries, maintenance, supplies, etc.)
• Projected budgets of improvements and enhancements which you believe are necessary to grow the business (additional equipment, new signs, new amenities, etc.).

Depending on the entire package, a business that’s for sale for $800,000 could become more out-of-reach to you than one that’s listed at $1,500,000 with the right complete package. Only after considering the entire opportunity can you truly determine if you can afford to make an offer.