All Forum Posts by: Chester Transo

Thanks Jim and Matt for your quick responses.

Guys, I'd like to pursue this capital expense thread a bit more if I can, because I'd like to get a better feel for what reserves need to be put aside for all of those curve balls that can come your way with an older park, goven that an older park is the most likely scenario for many newbies. 

I know that some of the lenders on this site have commented on properties that have come back to them from buyers who got in over their heads. While poor management is the most obvious way to get into trouble, not having enough funds in your capital reserves for the unforseen would certainly be right up there, I would think. The worst mistake we could make would be to assume that a low down payment and some generous seller financing will get the job done.

So Jim, if we were to drill it down a bit more for you, could you give me the benefit of your vast experience in this area?

Let's say that we are talking about a park: 

-Originally built in the 60's 

-On city water with galvanized steel water lines 

-On city sewer with tile sewer lines

-Has some vacant lots but meets your criteria of not being a large infill project 

-Something that could get a good bounce from tightening expenses/raising revenue

-But has some deferred maintenence issues

Assuming all other things would be the typical scenario that you would encounter on your deals Jim and Matt:

1. What things would typically need to be repaired in years 1, 2, 5, 10?

2. How much would you normally put aside to:

a. Meet the above capital repairs/expenses for years 1, 2, 5, 10?

b. As a turnaround fund to change the fundamentals of the property with a goal of significantly improve the NOI.

Thanks again for everything guys.

As a long time lurker, but first time poster, I have to tell you all that I am really impressed with the quality of the posts and all the awesome cooperation shown in this forum.

In an older post Jim Johnson said "In older parks, like the ones built in the 50s, 60s and 70s you can expect many more issues because of the materials used to build the parks. Sewer, water, electric and gas lines were held to a entirely different standard then. So do your due diligence well, understand the common problems and have a short list of contractors and fixes for the most common problems. Older parks are a far more complicated dance..." (http://www.biggerpockets.com/forums/30/topics/41955-water-and-sewer-under-pads-)

So that raises some questions:

1. What would be some of the common problems and capital expenses that would need to be budgeted for with an older park, assuming that it is on city water/sewer?

2. What would be a good short list of fixes for the most common problems?

3. How often could we expect to see these expenses over the long term?

4. What are some of the most common areas where sellers try to hide deferred maintenance?

5. What signs can we look for that would indicate that a park has a lot of deferred maintenance?