We’ve been talking to the aging owners of a park in a good SE market for a few months now, and I’m about 90% sure we should walk away from this one, but wanted a gut check from this community. The owner is dying and his wife is eager to sell. They own the park outright and have been the only owners. They’re offering full seller financing. This seems on the surface like a great opportunity. But given that this would be our first park is raises a lot of red flags about deferred maintenance and potential environmental disasters.
Here’s the specs:
- 35 acres close in to a 100k+ city
- 70 permitted spaces
- 53 occupied, 10 POHs
- Lot rent $275, $500 POH rent
- Well and Septic - 2 wells, each home has a septic
- 8 different electrical meters that they then submeter
The park used to be larger, but they had to shut a section down due to environmental issues. The major issue at play here and the big red flag is that while their yearly gross rent income is around $200k, their expenses related to managing the well are getting astronomical. This year they’re almost operating at a loss because they’ve had close to $50k in environment fines and testing fees. Their NOI last year was $45k, and it’s trending about $10k this year.
I talked to a guy from the county and he wasn’t able to say for sure if the well needs to be replaced or if they’re simply not maintaining it. He did make a point to mention that they’d be really excited to get a new owner in and would work closely with helping them fix the issues. Either way, the owners have been behind on paying the environmental contractors - which is likely part of the major expense they saw this year. Obviously theres a lot of mismanagement happening.
My concerns about this are obviously the well issues, along with the unknown septic issues that may be lurking. Plus I’m pretty sure this qualifies as master metered electricity and I know that’s a headache. They’re asking 1.5 million, which they based on their tax assed land and POH value. I’m confident they’d negotiate to a significantly less than that.
I’m ready to walk away and tell them good luck, but wanted to get the experts opinions before I do. Thanks in advance!