Trailer Park: good deal or not? 575k?

[Collin Cavanagh]

Hello BP, 

I am a relatively new investor. I have been a member for some time and have done only 1 live-in househack/flip and now have another primary residence. 

A friend and I came across a potential deal for a trailer park and I have a few concerns and would be interested to hear some of your ideas. I am weighing this purchase against holding my cash position for potentially upcoming foreclosures and Covid-19 economic fallout. 

I live in Reno Nv, a market very inflated by Californian emigrating from metro areas. As a result BRRR and cash-flowing rentals are not really an option here now with such high price points. However, it is undeniable that this city and surrounding cities will see a rise in equity whether the economy holds or crashes since people are coming here in either scenario.

The trailer park is in an outlying city, but will still grow with Reno. Much of the infrastructure has been replaced and we are comfortable with the physical condition (after phone call, but we are viewing property this next week) Financial details are :

Asking price: 575k

Owner financing with 120k down, 10 years, 5%.

Park owns 5 trailers and 1 building. Building and 2 trailers "remodeled" (I haven't seen them yet)

21 spaces

I have spoken with owner/operators (mom & pop type) and the actual and current financials are:

Income 7900 (I calculated everything at 7600 to be slightly conservative)

Expenses 1600 (includes all utilities)

My calculations set aside 30% for Maintenance/Cap Ex/Management.

Our offer would be 500,000 @ 3% with 120k down, 15 years.

This means we would only cash flow $1100/m but would have a valuable asset in 15 years. Giving the owners asking is not an option at all, as we would negative cashflow over 1k/m

Specifically, my questions are these: 

Is this a good deal for this kind of asset class? 

Is it worth tying up 120k when the market is teetering on the precipice of huge change?

Is this a lowball offer? 

Is setting aside 20% for maintenance/cap ex excessive?

Is setting aside 10% for management realistic?

What is the liquidity of this asset? If we could get it for this price is there any actual equity built in that could make it sellable in a few years? I just don't know enough about parks to be confident that this is a deal or not...

Any thoughts would be welcome and appreciated. 

Thank you to all who have read my longwinded post.

Collin