Advice for Taking over Drug Infested Park


#1

Hi all,

I am under contract to purchase a 73 space park. The park owner became addicted to drugs and really let the park go. Drugs are rampant in the park and only 30 tenants are now left with about 30 more empty trailers in the park that the old owner didn’t even try to rent out after the old tenants left. All city utilities and paved roads. The park actually looks pretty good.

The park now has a very bad reputation in the town. Does anyone have experience being able to turn around a park like this? My plan is to sell off many of the homes when I purchase it but my concern is that I won’t be able to find good tenants to move in because of the bad reputation the park already has.

Thank you,

AJ


#2

We purchased a park in a major MSA that had some drug problems. My advice if you buy that type of park is to (1) come in with significant capital to reposition the park (i.e. Capital for park facelift - new sign, tree work, roads, fences - anything to get reputation going the other way) and (2) Make sure you have a REALLY good eviction attorney lined up and (3) Get ready for your NOI to drop significantly for the next 6-18 months while you turn it around.

Our park was about 35 spaces which we bought for $500K. It was 100% filled when we bought it. We literally evicted 60% the tenants over a 12 month period. We made various community upgrades to reposition park, tore down a dozen homes, brought in half a dozen new homes, and rehabbed all the other vacancies of former drug tenants. When the dust had settled we had a great looking park with a completely different tenant base. It also had a completely different reputation - the police commented that they haven’t been in our park on a call in two months (used to be there multiple times daily). We ended up pouring in around $200K cash to get it all done. Today that park is worth over $1M and is one of our more turn key properties in our portfolio.


#3

The park looking good will likely trump any perceived reputation. Make sure the park is cleaned up and the houses you’re selling look presentable, and sales will happen (assuming there’s a general demand in your market)

Also, enact a strict no pay no stay. 90% of bad tenants are also bad at paying rent - if you evict those who don’t pay you’ll also likely be getting rid of the troublemakers.


#4

Thank you both very much for taking the time to reply and for the helpful information.

I think I am going to jump in and give it a shot!

Thanks again,

AJ


#5

Just curious how this turned out.


#6

This is what I do, if you still need help on this, message me privately and I will help you fix it quickly.


#7

Any update on the turn-around?


#8

Hello everyone,

Here is an update on my venture since buying the park:

First the good:

  1. I have evicted most of the problem tenants. This wasn’t always cheap and/or easy. The local judge in town is very favorable to the tenants unfortunately and only holds eviction hearings once per month.

  2. I have fixed up and rented out about 10 out of the 20 viable empty trailers on rent to own agreements. Again this was not cheap and/or easy but it has been accomplished.

  3. My gross income is now at 12k per month. However, the costs to fix up the empty trailers for contractors, managers, supplies etc in addition to my monthly expenses are still high so I am basically breaking even at this point.

  4. People around the city have been grateful to me for cleaning up the park. I had one person tell me that “the park has come back to life again.”

Here’s the bad

  1. It has been very stressful. From finding competent people to all the unexpected phone calls from tenants and the park manager, I find my park is the first thing I am thinking about when I wake up and the last thing I am thinking about when I go to sleep. Just to name a couple of the unexpected surprises, a couple of drug heads broke into a vacant trailer and overdosed, a huge fight broke out between several tenants, the old owner of the park showed up stole some of my equipment, and I have already been taken to small claims court by a disgruntled tenant.

  2. The bad tenants have been pretty aweful towards me. One tenant called the health department on me for evicting him. Another tenant made threats towards me.

  3. Water leaks have been killing my profit. I’ve come to learn the park has some major water leaks which I still cannot locate. My water bill each month has been ranging from $3000 to $4500 which is outrageous in my opinion and nobody seems to know how I can locate my water leaks.

  4. The park was already submetered for water when I purchased it. However I discovered shortly after buying the park that the water meters were very old and had stopped working years ago. This means I had to purchase and install new water meters which has been completed for the most part. This also means I have been paying for all the water the tenants use.

  5. My property taxes are very high in my opinion. I pay over $10,000 per year in property tax. This seems outrageous to me considering the condition of the park.

  6. The old trailers that are junk are expensive to demolish and remove. It is costing me $2000 per trailer to have it demolished and removed.

I will keep you guys updated as time progresses.


#9

Thanks for the update Mobile. A few random thoughts:
-I feel your pain. The first park I bought was by far the most stressful experience of my life. One small piece of advice is most things seem really bad in the moment, but eventually blow over and have little to no long term effect.

-Property taxes are confusing, but you need to understand your property taxes through and through, they’re too important to just guess at. You need to call the tax assessor, and understand completely how they are calculated, and if the appraised market value of your park is more than what you paid for it. If it is more, you need to appeal it. If you can’t do any of this on your own, you should hire an attorney to review it for you.

-$2,000 is actually a pretty good price for removing old homes.

-Locating leaking water lines can be extremely frustrating and difficult. It took me 8 months to find one leak. Two leak detection companies had missed it, and then my manager randomly noticed the snow was melting really fast in one spot, and found the leak. You need to keep at it, hiring leak detection companies and/or having people walk every inch of the property.

Good luck, things will eventually get better if you keep chipping away at problems.


#10

Thanks for the post. Good stuff @MobileAJ seems like you’re getting over the hump. I agree with @Noel_S 's comments.
Only thing to add is that Frank recommends https://www.americanleakdetection.com/locations/ for leak detection problems. Not sure where your park is but this company has franchises all over the US. If they are not close to you then go with a reputable local company. This issue is costing you too much money and it won’t go away.
Cheers!


#11

Did you rename the park, new google listing, website, etc. That might help with the reputation/reviews.


#12

I just invested in a similar park. Drug infested but in a great area. Am in process of evicting/re-homing about 1/2 of the tenants. 2 homes were not salvageable due to a fire. Received quotes from $6500 and up to remove them. Found that it was much more cost effective to rent a dumpster and dissemble. The workmen were really excited about taking the aluminum to be recycled.

Evicting so many is creating a lot of opportunity. Looking at re-arranging home sites to maximize density. (current park is only at about 60% of density that zoning allows). Also looking at Geothermal as a clean/GREEN way to help tenants with heat and AC. (Hoping to offset costs with higher lot rents)

Call me crazy but I’m even looking into Solar Carports. They aren’t cheap but I can hold a note for them and not worry about Dodd Frank compliance.


#13

I want to commend you for taking action. I noticed you never complained and just stated the facts for what they are, that mindset is huge. We bought in July and it’s been stressful as well, one day I was nearly spun out and had to think for a bit. This is all just like working out or exercising, it’s no fun while you’re doing it, it hurts, you wanna quit, wonder why you even started…yet the next day you go again…why? You know in the end you’ll be faster, stronger, quicker, healthier, etc. We are stronger because of the stress and no matter how bad it seems at times, it could always be worse. The flip side of that is we’ll always be improving so we’ll always push our limits and bring on the stress :wink: