Hay everyone, I’m new to the park buying side of things and will be in Austin Tx this weekend for the Bootcamp.
Here is the park info I got from a phone call and some google map searching
Newer park started 15 years ago
Close to major attraction in Wisconsin
33 lots scheduled but 16 built 13 rented 12 POH
Well and septic = 1 well per 2 homes 1 septic per 4 homes sandy soil with good perk
Below grade electric service and homes are on separate LP
30x50 Maint building
Roads are gravel
Lot rent is $250 homes are rented from $450-$650
Listed price is $399k
My calculations are:
$250 x 13 x 12 x.7 x 10 = $273k Given that park owned homes are involved I went with $3k/home avg so $36k bringing the total to $309k. The broker is stating a 19 CAP with $77K NOI
Owner financing is available with roughly 25% down.
Best places does not have good things to say about the town but it is 15 miles from Wisconsin Dells that Best places likes much better.
Ok so please tear this apart for me so I can make a fool of myself here and not in negotiations. I’m really kind of happy that I made the calls and apparently sounded like I knew something with my questions.
Private utilities on a small park is generally not a good idea.
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How many wells does this thing have and why does it have so many?
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One septic per 4 homes is not ideal.
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A 30% expense ratio on something like this is very unrealistic. It doesn’t sound like you are setting enough money aside for Cap Ex in your numbers.
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The park is not in Wisconsin Dells. Most people won’t give brownie points to a bad area just because it’s 15 miles away from a desirable one. Your area is what it is. If it’s not good, then there’s nothing you can do about it.
My calculation would be 13 x $250 x 12 = $39,000 @ 50% expense ratio = $19,500 of NOI. From everything you listed, I wouldn’t pay a 10CAP. Maybe a 13+ might get me interested. So, $150,000 and $30k for the inventory. $180,000 would likely be my top dollar.
From there, I would insist that the seller finance this to term because there is no way in hell I would sign recourse on a park in an undesirable area, that is small with private utilities.
apparently the wells and septic were placed that way to avoid epa standards for larger well to home ratios.
13 x $250 x 12 x .6 x 10 = $234,000 at a 10% cap rate. But you would need a higher cap rate to entice you to buy a park of this size, so at a 12% cap rate it’s $195,000. But the bigger issue, as CharlesD said, is the private water and sewer on a park of this size. That’s typically a deal killer for us. If anything goes wrong, you don’t have enough lots to justify the capital expense. It costs the same to drill a well for a park of 100 lots as it does for 16 lots. Unless the park is the hottest location in the world, I’d pass on it.
See you in Austin!
I knew the answer to that one before I asked it. I’ve looked at at least a dozen parks that do this and they scare me every time. Aside from having to worry about multiple wells, I’m just not sure I want to be associated with a park that is clearly using a loophole to get around testing requirements. There are too many parks out there to get wrapped up into something like that. I have an ethical side to this as well and potentially poisoning my residents doesn’t line up with my moral code.
Continue your search Mike. Expect that it’s going to take 6 months to a year of hard work to find a park you can be 100% sure about owning. You are on the right track by educating yourself and persistence will get you a quality property.
Ok so that one is off my list, now to investigate the nonflood plain riverside park off of a major highway. I’ll post about that in a different thread. Thanks for the help.