Advice on 16 space park across from elementary and middle school?

Question

Hey fellas! I'm currently looking at a 16 space park across a street from an elementary school and a middle school. The schools have pretty average ratings and the park isn't doing so well.

According to the profit and loss statement it's currently grossing about 70k and netting about 40k after operating expenses. But capital expenditures are around 30k this past year so actual profit is only about 10k.

According to the owner there's 1 vacant space, 1 tenant owned home, and 13 park owned homes.

I drove through and noticed that most of the homes had holes in them and were being held together with tape. Also the entire park is gravel with no pavement and there's trash all over the place.

Some of the homes have damaged cars parked in front of them and clutter around them.

I also noticed a puddle of water near one of the hook ups which might indicate plumbing issues.

The owner is willing to sell for about 400k. (this is in a major city in the South West by the way)

My first thoughts are that If I buy this park I should sell the homes off and raise lot rents ASAP. Can any of you share any strategies for doing that? Any other general advice would be appreciated. Thanks!

Account Closed · Answer

Why isn't the park doing well?  What is the market lot rent? @Justin Ramos  Schools can be relevant but preliminary number crunching , you can leave it out.

You say its a 16 space park but 1 vac, 1 TOH , 13 POH, where is space number 16?

What do you mean homes had holes in them?

Are you on city water , city sewer?

Major cities are good. You need to focus on the valuation. The park could be worth what you say it is if mkt lot rents are 300 plus a month  making the assumption you are on city utilities. Gravel road and all the POH should knock the price down though..

W/O knowing other details or market rents, sounds like its priced retail but it needs to be at a discount with turnaround that would be required on the limited info you have provided.

Jeffrey H. · Answer

I have done some diligence on Parks exactly like this - the POH are a disaster and you're going to end up effectively moving all the POH out of there since they're already worthless and have to move in nice(r) ones so you can get better tenants and rent rates.

Also when you're renting like that the area typically isn't nice and there is lots of crime, which means you have to spend money on fences and bushes with stickers to deter people that want to smoke crack in your homes when they are vacant.

Capital intensive and cannot get financing.  Lots of upside, but there are Parks with fewer headaches out there.  Check out the Mobile Home University (MHU) Due Diligence Manual if you have not already - worth every cent.

John Arendsen · Answer

There are Manufactured Home Communities (MHC's), Mobilehome Parks (MHP's), Trailer Parks, RV Parks and finally "TOILETS". Not to be too overly general and not knowing about the surrounding area/s I really can't give you an educated answer.

But going back to what I always consider the number one priority and concern is whether or not the park is in the path of progress or in a downtrodden and blighted area that people are moving away from instead of into. You mentioned the schools being across from some schools. This can be a good or a bad thing depending on the short and long term socioeconomics and demographics of the area.

If it's currently zoned as a MHP and your due diligence reveals that it's in the path of progress and the infrastructure isn't in too bad of shape then it might be worth pursuing. But do remember that some of the older MHP's have very low amperage i.e. 30 t0 50 amp output and most newer  MH's require up to 100amps. Also is the sewage old rusted out cast iron that needs to be replaced.

Lot's of questions and concerns arise on this one. Sounds like a lot of MHP's I've researched and abandoned because they just needed to be totally scraped and redeveloped.  Just my 3 cents worth adjusted for inflation. But good luck and be sure you do a lot of due diligence.

Justin R. · Answer

Sorry for the limited info guys. This is my first park so I'm doing my best but it's difficult because I have nobody to refer to.

The park isn't doing well because the profit and loss statement said that they spent 18k on capex over the past 9 months. It also says that CapEx is projected at 18k for the following year. In addition the owner said that CapEx for this year is closer to 30k. I'm still waiting to hear back from the owner for a breakdown of what those expenditures were actually for but when I talked to him it sounded like  it was mostly for evictions, and POH repairs. After CapEx the owner only pockets about 10k on the park so it seems like a pretty big issue to me.

Market lot rents are around 300 to 350. Tenants are paying in the range of 300 to 500 to rent the POHs. With the information I have my plan is to sell the POHs to the tenants and then raise lot rents to market as soon as I take over However many of their leases do not expire until the summer. Does this sound like it could work? I'm pretty much just winging it here.

Also what's a fair price per square foot to pave the park with asphalt? Again I have no prior experience with parks and I'm trying my best to paint the picture for you. I appreciate your help.

Advice on 16 space park across from elementary and middle school?

Most Popular Reply