Need help with deal analysis and due diligence

[Alphonso Clark]

There's a local park that I've been interested in buying for years but the owner never wanted to sell. After a couple of years now he ready to get rid of it.  The park has 27 lots 8 of which are currently rented for $85 a month.  7 have old homes no one's lived in for years that have been stripped of almost everything and need to be torn down or removed. The other 12 are overgrown lots that need to be cleared off. There's also an old storage building included as well. I think each lot has its own septic tank, water, and electric meters. The gravel roads throughout the park are in bad shape and need some work.  The owner is asking for $5000 a lot and said with $10000 down I can pay however I'd like each month. I really want this park to turn it around and add value to this community so any and all help and advice will be greatly appreciated.

[John Fedro]

Hi all,

What a great site to have a handful of excellent, well-thought out responses in just a short period of time. I too am in agreement that this seller is asking too high of a price, based on the description you gave and the limited info we have. Perhaps if there are some mineral reserves on this land that is another story, however assuming not then I would only like to add a few things.

1. "Price cures most worries." This was something taught to me by a mentor years ago. In short, if you are having doubts then by all means do not simply pass, make sure to offer a price or terms that does make sense to you based on your financial means, time, exit strategy, etc. Perhaps $135k makes sense if you can pay the $10k down and $50 per month until paid in full. Or perhaps you can partner with the owner in some way moving forward. Again, I know so little about the property I am not saying this is a good offer, just something to consider.

2. In my opinion this is a semi-long play type of park. Just know that you will fix, add, resell maybe 4-8 homes a year, it will not happen overnight. This will cost time and money for sure, this is time and money you won't be using in other deals you find along the way. Again, with the right terms the deal may be solid if there are no surprises, aka perform due diligence on infrastructure, area, etc.

3. Depending on the area, is it possible to turn this park around? If you have good homes in the park, will Buyers come? You sound a bit emotional about this property. It is very good you want to fix and turn this park around however if the seller is not realistic then by all means there are other deals out there for sure. Make sure the seller knows how interested you are but that you have real reservations about the price, terms and cash layout this project is going to take moving forward. Express that you don't mind taking-over a headache however you will not overpay for it.

I hope this helps and makes sense. If anyone does not agree please comment and lets all help each other.

Talk soon,
John Fedro