Looking at purchasing a small park 40 lots, only 10 occupied, from an older owner that has let the park go. Essentially only collects rent for pocket money, no financial records from the last 20 years. Has lots of potential with a lot of work, but want to make sure I’m going in with a reasonable offer. Currently asking 250k Open to seller financing with a big down payment, I can manage the downpayment but want to get the purchase price right.
Any ideas on how to begin evaluating? Just value the land? Price per lot?
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Consider taking Number of occupied lots X amount of space rent only. Then if tenants pay all of their own utilities, take off around 30% for expenses. If they don’t, take off 40%. Then cap out at either 10%/12% depending on what it’s worth to you. You may even Consider capping it out at a 6,7, or 8 depending how quickly you anticipate increasing rents, billing back utilities, etc. And turning it into a 10 cap relatively quick.
The location (and therefore lot rent price) needs to be good to justify the cost of infilling of the park. Purchasing a park like this in a small town with $200-$300 lot rents is generally a bad idea. Park turnarounds take more time and money then many people think. Often times it would just be easier to purchase a park that is already mostly filled up.
What’s the lot rent in the area?
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since the park is so neglected, using the quick eval formula prices it at $7k for a 10cap 
would one approach a deal like this valuing just the land?
spot on with the lot rent assumption 200-300 depending on quality of park in the area
yeah I really would pass on this at that price for sure. I’ve bought, managed, and done turn around’s on 6 small parks. If you could find a 40 lot park that’s running better, you’d be better off imho.
Imagine this, you have 2 choices:
- You find a 40 lot park for 800k in a similar location. Only this park is full and cashflows from day one.
OR - You buy this park and end up with over 800k in purchasing the park and filling it up and have to put years of sweaty and stressful work into it.
I’ve done both options and really prefer choice #1.
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The valuation of a park like this is entirely dependent on the location. Near a hot Colorado market it would be worth several times that asking price. In rural kansas it would probably be worth close to $0.
I would look at the value of the park turned around, subtract out the hard costs and costs of capital, and then determine how much my time and the risk is worth.
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I’m pretty sure I know which park you are referring to if it’s located in a southeastern state. I spoke with the listing agent about this. I wouldn’t touch it at asking price. It would require a TON of capital investment, not to mention your time. The market also isn’t spectacular.
There’s a lot of wisdom in this thread. I took on a similar park without adequate reserves and it has been a hard slog. Fortunately, I seem to like the abuse, but you MUST consider: 1 money and time for any units you need to renovate. It will be slow, expensive, or both. 2 there are likely hidden capex projects like galvanized fresh water or clay sewage pipes.
Seriously consider your reserves and then double them on a ‘fixer upper’ park. Ask here or via pm to someone that looks trustworthy. Planning to improve out of cash flow is a fool’s game. A large down payment means the owner does NOT want the park back if you give up.
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Run as fast as you can. I had a similar deal on a park that the 92 yr old man dragged out for almost three years. One issue after another arose with wells, WWTP, insufficient record keeping, etc. Is was a 50 unit park with 19 occupied lots but rents were not being collected, park was a mess, and in a small town would have taken a ton of work and money to get turned around. I would run as fast as I can.
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I just bought a park with 28 pads, 3 occupied with lot renters, 2 vacant homes in decent shape and a stick-built home.
I only bought it because it’s in a university town and it was only $137k. It appraised a little over $200.
The utilities are all direct to the renters so my costs are low. I know a mover in the area and there are always used homes for sale. It’s still going to be headache filling 25 lots but my costs are so low I’ll just do it over 2-3 years and not stress. I’m in it $27k for the loan and I have a LOC from the lender for buying and selling homes.
We’ll see how it turns out lol
I may try to section off and sell the home up front to get my initial investment back as well.
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Updates? Sounds like an interesting deal.
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Didn’t end up going with this one. I was ready for the work but didn’t have enough capital at the time to do the necessary infill.