Thanks in advance for all responses. I am new to the business (8 months in) and I have been cold calling trying to find off market deals. I have successfully wholesaled one park to a buyer and have another potential seller but this park has a sewer treatment plant. I attended Frank and Dave bootcamp and I know the cost to replace something like this can be quite a bit. My question is, do a lot of buyers look at parks like this. I believe I can get this under contract as the seller seems quite motivated but wanted to see if this is something buyers would like. I would like to wholesale this and possibly obtain a small equity in stake in the deal. A little more info about the park and metro is below.
Ohio Market Pop. 98k
Med Income 40k
Med home price 92k
Park Info
total # of pads48
Vacant lots- 20
Vacant homes-0
Lot Rent-300
POH 3
TOH 25
Water -City
Tenant Pays-Owner pays
Sewer- Sewer treatment plant
I only look at parks with WWTP if the financials can support it. In this case, a half full 50-pad park would only get my attention if the packing plant was under 10 years old and in immaculate condition.
Since city water is there, you should look into whether you can tap into city sewer. It might be the same cost as replacing the plant, or at least giving you the business case to proceed under long term assumptions.
There are currently lots of buyers out there that are looking to deploy capital and will bite on nearly any deal. That being said underwriting a park with a treatment plant is vastly different than a city utility park. Operating costs of the package and capex decreasse the value of the park by as much as 30 to 50% and possibly more compared to city utilities. At 50% occupancy the park is most likely a negative cash flow deal if you calculate in capex and at best a break even without capex on the treatment plant. The only way the owner makes these look like they are currently positive cash flow is by understating operating cost of package plant and excluding capex.
Thank you for the replies. Owner has been very vague about the WWTP stating a pump was replaced 2 years ago and and it gets serviced twice a week and those reports are given to the EPA. He has also only owned the park for 4 years so I am not really sure if this is the reason why he is getting rid of it or not.
I have not seen financials as I plan to do that once under contract. I have a clause in the contract that states D.D does not begin until financials, surveys, etc. are received but seller advised NOI roughly 58k and the owner wants 300k. So on paper looks to be a decent deal but would need to find out more about the WWTP and verify financials. Thanks everyone for their input. Will keep you updated on what happens.
Can you connect to city sewer? If yes, what would the cost be to do so? Do you need a lift station? Is there a tap fee?
Those are some key questions that any “deal maker” buyer will ask.
If the answer is “no” then the big question – as has already been pointed out – is the age and condition of the current packaging plant. That will be the big focus of any sophisticated buyer or lender.
I once went to an auction of a park in Ohio on failing packaging plant. The most you could pay and make money was $500,000 due to the cost of replacing the packaging plant. I watched it get bid over $1 million, I ask the buyer after the auction “what is your plan about the packaging plant” and he said “what’s a packaging plant?”. Ouch.
The seller stated the sewer lines were not very close but he does have city water so once we are under contract we plan to dig a little deeper and see if that is true. I find it hard to believe that sewer is not possible as the park is off a major highway and is in decent size metro of Ohio ( Ashtabula). We have asked for 60 days D.D to hopefully try to uncover as much info about the infrastructure of the park. Thanks again for the replies!
Have owned and OPERATED WWTP but with over 75 sites. Less than 60 sites is not economically efficient since their are too many electrical motors and controls that can and will cost a fortune to operate and maintain with too few sites. EPA continues to change the outflow standards–from information given–I would PASS!!! The future pool of buyers even interested will be less than 20% of potential buyers–too many problems but possible with lots of sites.