Mundo Sanchez runs an RV park deal through a debt-service calculator and finds it loses $14,000 monthly, not the $201,000 NOI it appeared to make. At 75% loan-to-value with 7.5% interest, the $4.35 million loan costs $30,000 monthly. Even at 50% LTV, the deal still loses $3,400 per month.
So someone sent me an RV park to take a look at, and at first glance it looks like it's actually making a lot of money. But today I'm going to show you how you can figure out whether or not the property is worth pursuing in less than 1 minute. And I will tell you, it is super, super easy. I'll even give you the tool to be able to do it yourself because underwriting an RV park takes a lot of time. If I just look at the files that I have here as part of this underwriting package, we have a sewer report, a park map, we have all this utility information. We have literally over 20 documents. It would take me hours to go through that. Now obviously I can use AI to speed that process up, but I want to know within 1 minute, should I even waste my time on this? Yes or no? And today we're going to answer that question in less than a minute. Let's dive in. Okay, so the first thing we're going to take a look at is the actual P&L itself. You can see here this property is generating $201,000 in net operating income, and it actually sounds like it could be a good deal, right? Well, that is until we find out the purchase price is $5.8 million. So let's just jump over to this free calculator tool that I'll make sure you get access to, and we're going to plug in this information. So it's $5.8 million, we have an NOI— I'm literally going to take the exact NOI— we're going to plug that in. We're just going to leave this at 75% LTV, 7.5% rate. We're gonna calculate it and you can see here it's calculated what our annual debt service number is. So what this is doing is saying based on these parameters on what a loan will be based on $5.8 million, that will mean our loan will be $4.35 million loan. That's going to put our monthly payment at a little over $30,000 a month. When you add that up, $30,000 times 12, you get that number. So So when you look at NOI, that $201,000 may sound like a lot of money, but you're actually losing a ton of money. You're literally losing almost $14,000 a month because you have to factor in the debt service payment. Now, can you go back and change this? Absolutely. You can change this to 50% LTV. You're still losing $3,400 a month. Well, guess what? That means you're putting a 50% down payment into the deal. Where's that 50% coming from? A lot of times people are raising capital to put into the deal, and guess what? Everyone that is putting money into a deal, they're going to want a return on their money too. So this number, no matter how you slice it, is actually going to be worse. And for this reason, I know that I can stop right here and I don't have to look into the underwriting any further. I don't need to look into the 15 files because I know that this is not a deal. So if this calculator is something that you would like to use for your very, very quick back-of-the-napkin math underwriting, drop your email down below and I'll make sure you get it. See you guys next time.
