How far is too far gone? Upstate NY Park


#1

I’ve recently started sending direct mailers to select counties in Upstate New York. To my surprise, I received a good response rate from my first mailing (6%) and have been talks with one of the more motivated owners about his park. I’ve gotten a video drive through of the park and spoken with the owner of an excavating companies that did repairs on the park.

My question is the park too far gone? The price is very low but this may be too large of a turnaround project for my first park and it’s not cash flow positive as it sits. I’d love some input from experienced members as I’m weighing the best option going forward (buy, wholesale, or pass).

About the park

  • 3+ acres, gravel roads
  • 20 lots
  • 8 are occupied, all tenant owned homes
  • Two vacant trailers in poor condition
  • City Water/ Sewer (landlord pays)
  • Newer (90’s) natural gas lines ran to 3 lots
  • Lot rent is between $280 and $300
  • Property taxes are ~$8k per year

Now here come the problems…

  • Long term tenants however only 3 of the 8 regularly pay - all others are spotty or don’t pay
  • All tenants have Oil heat with older tanks (seems like a big liability)
  • There was one tank leak previously but it was correctly remediated
  • The steel water lines are at the end of life and need to be replaced
  • Average monthly water bill is ~$750, a recent leak on the main line led to a $7k bill over 4 months
  • The owner has severed the laterals for most/ all the vacant lots
  • No issues with the sewer or electric but the unknown condition
  • NY state has strict regulations about new pads - aside from the standard items they have to be 6" of gravel + a vapor barrier (estimate of $1-2k per vacant pad including laterals)

About the area:

  • Market lot rent of $350 (incl. water)
  • County population of 200k+
  • Good demand: rent-to-own test adds have pulled well (5-10 responses per day)

This doesn’t seem like something a bank would touch and there’s a lot of CapEx in the water lines and filling the park in. Should I run or could this be a deal worth saving with upside?


#2

If this was my best option for a first park I would want it to be no more than 4-6 hours away. Back yard preferably.

You didn’t mention price. That is probably the first thing determine whether you spend anymore time on it. If it’s not a great price it won’t be worth it.

Property taxes, water/sewer, ins, maint, ect will probably eat up all income for the first couple years if everyone was paying but you said only 3 were. I think this has to be an owner carry with small down payment. You are basically bailing him out because he can’t manage it.

There’s more to discuss but if price and terms aren’t incredible then walk. Not sure you can wholesale a deal in the red.


#3

Thanks for the quick reply - I like your thought about distance. I’m relocating for work soon which will make the park longer than 4 hours away but it’s in the areas I grew up so I have good network there.

As for price that’s one of the good parts - the seller inherited the park from his father and wants to be done with it. He’s behind both the water and tax bills (~$20k) and the prices is basically that - to make him whole.

The biggest unknown/concern for me is the Oil tanks - with one small spill previously and lots of unknowns I’m concerned about liability/ costs of any older spills get uncovered when prepping new pads or replacing the water main. NY State seems to be strict on these types of issues and the last spill was ~$20k to remediate.

If I went forward and got a Phase 1 done that didn’t uncover any environmental issues would that protect me from future liability if something was eventually discovered?


#4

It sounds like an opportunity and for 20k , i don’t think your down side is tremendous. You will need available capital on this for the turn around. Its less than the cost of down payment so no need to worry about financing. The big variable is the oil leak. Get what papers you can on it and talk and consult with a phase 1 company initially on the front end to see if its an issue or not. They will give you a good answer. And if not , and it requires a full on phase 1 $1500-2500$, i think its worth the ante to get into the game on this one.

Make no mistake though, if that checks out, you will need a partner or somebody for that capital on this.

Heres my take, ive wholesaled or partnered on about 10 deals i think at this point. If your going to try to wholesale something like this and don’t know the end buyer i say no. The reason being , this guys in a bad spot owning the park and you can hurt him further especially if you cant procure a buyer. Ive gone into my deals either thinking i could close if need be or had a buyer lined up ahead of time. Additionally, i had an assignment fall through that i bought, deals i thought were assignments i partnered on , and deals i thought i would buy but then assigned. So i guess my personal experience its not so clear cut. I worried about the deal first then the pieces later but those were mostly cleaner deals compared to this.

You could hopefully get those property taxes chopped to a much more reasonable level.

Im not sure what you are calling lateral lines, i thought that was a private sewer term .

The reason i think its all worth looking at is there seems to be great demand so in theory , turn around, this can be a good end product on a strong lot rent .

Again, just going to reiterate, if you go at this, you NEED a large capital stack. If you want to get more serious about it , getting prices on the water line replacement , tax appeal firm on reduction, make sure you can bring in homes ( if you do the proper pad ) .

I also would want to make sure you can add homes without issues.

This would be a great deal with a partner . As you market , see if you come across any owners of this type of park locally who might be willing to work with an investor. I would much rather be close to this ( the only way id do it) . Im not sure how strong your network is on this but you really need a partner who has a vested interests in having it all go right , i wouldn’t want to just friends and family it with all thats required.

Good luck.


#5

This is too much of a lift for you. You are buying a permit, 5 homes and a headache. Compared to the financial burden this thing will pose (large), the purchase price (small) cannot make sense unless you are accurately estimating the time and market price at the outcome (who knows).


#6

Run. For every negative you know, there are more you don’t know. How long can you afford to float a ship taking on water? If it looks bad, what will attract new occupants? Can you afford the time to bring in homes, set them up, advertise, show them? Just a lot of potential problems that will be hard to overcome…mho.


#7

I appreciate all of the feedback on this deal - I was on the fence (and likely a little too excited about a lead coming from my first direct mailers) so it was great to get an outside perspective on this.

I agree that the demand’s there and it’s a pretty good market for MHP’s. I spend a few hours doing a year-by-year turnaround analysis for this and even assuming there’s no other large CapEx (i.e. sewer, electric, or environmental) the park would be negative cashflow for the first 3 years.

I also spoke with all of the MH dealers in the area and they’re only seeing a few used/ trade-in homes per year (if that) so filling the park up might be more time consuming that I anticipated.

I’m planning on passing on this park - for now - but keeping an open dialogue with the seller if anything changes.