Great Deal! w/ Private Utilities


#1

Let’s get this hammered out. I’ve found several great park purchase opportunities working directly with sellers which have private utilities. (I know and I’m planning on buying them, too)

Once half the folks reading this have changed their shorts, I’d love to hear who is seriously interested in parks with private wells, septics and packaging plants. I know there are a ton of potential buyers on here looking at parks. In certain areas of the US like the Northeast for example, you don’t find a lot of parks on public utilities. When you do find them on public utilities, they typically don’t have great anticipated returns. (Low cap rates)

When we consider our exit strategy, it’s difficult to know how good of a return we need on the front end to be able to make some kind of profit on the exit without knowing what buyers will realistically pay for a park with private well and septic OR well and sewage plant.

Is anyone on here interested in a 40 space park fully occupied with private wells and septics operating with no issues priced at an 8% cap rate? What if city water and city sewer is available ? What about an 9% cap rate or 10% cap rate?

How about a 57 space park 90% occupied with private wells and packaging plant priced at a 8% cap rate? What if there is NO city water / city sewer available but the packaging plant is brand new? What about an 9% or 10% cap rate then?

Both parks are in a decent metro 500k + with all the majors covered. (over 100k median home price, over 40k average household income, unemployment around 6%, low housing vacancy rate, etc etc)


#2

Hi Kyle, This is very interesting. I have been looking for a park to buy and pass on lagoons and packaging plants. I look twice when there are city services available in close proximity. A new packaging plant, hmmm. I’m interested.


#3

I don’t mean to mislead you. This park does not yet have a new packaging plant. It’s currently 45 years old and working great. However, I’m curious to know if it would make a big difference to the potential buyers on here if the plant was replaced and brand new. What kind of cap rate would you require at a minimum with a new packaging plant? OR would you still be too scared even with it being brand new?


#4

Sorry to be a downer but a 50 space park with a package plant is a mirage of profitability unless lot rent is plus $400. The way the current owner is probably doing it is by not setting aside money for capex on the package plant and doing the operation of the plant himself.

I’m more than willing to walk you through the numbers if you like


#5

Thanks Phillip! I figured you might have a thing or two to say on the subject. Don’t worry. Although I haven’t had a whole lot of responses on here which tells me something, I have had a couple phone calls and they echoed what you mentioned. Seems like most folks won’t even look at a park with a package plant unless its at least close to 100 spaces. The thing that made it seem like a possibility is the first quote I’ve gotten to replace the packaging plant came in at 225k. He’s also replacing the same size plant in the same town for that price. I thought it was low. However, that also doesn’t consider what it costs for the down time when you’re replacing the plant and still need to deal with the waste or engineering etc. This was for a 20,000 gallon capacity system. And you’re right, the owner was not setting aside any money at all for replacement, but he is paying someone to operate it. Between well and septic it’s running him about 18k per year in testing, etc.


#6

Sorry I meant well and WWTP not septic**


#7

225k sounds like your quote is from PCS. There is no reason one couldn’t be built for that price the challenge is then you add engineering, permits… Without more info: discharge permit, lot rent it’s hard to know the long term economics of this park. There has to be sufficient buffer to ride out regulations changing every 5 years and the other risks of having your own utilities.


#8

Kyle,

We are interested in MHP’s with water wells and septic systems regardless of whether they have access to municipal utility hookups. We like having the option of municipal utility hookups but the absence of them is not a deal breaker for us. We don’t consider WWTP or lagoons.

With the above in mind, we’d be interested in learning more about the 40 space, fully occupied park. We’d also be interested in working together if you find more deals that match the key demographic parameters you describe in your post.

Thanks,
John
www.LJCommunities.com