I am looking at a park with no park owned homes, but half the homes are 70s vintage, half the residents have moved in in the last year and the report from the building inspector is that a lot of homes are in bad shape (several need to be demolished, a couple had been recently red-tagged and demolished) and there has been a lot of turnover. Apparently homes have sold from one resident to another with no investment in fixing them up. I think I may be facing a large number of evictions, the need to either invest in fixing up a good number of those homes and/or demolishing homes. When valuing the park, how do I account for this turnover and fix-up risk?
Half the residents moving in the property within the last year sounds like a big red flag. Thats not typical for an owner occupied community even if the homes are older at least in my experience. Is the seller someone who bought the park with all POH and tried to do a quick turn to all Tenant Owned Homes? Half the benefit of parks in my opinion, is the stability of the revenue stream when the tenants own their own homes. You are going to have to factor getting the homes back , costs to turn etc, and going through this process a handful of times. Alternatively, if the market is strong and you can get people to bring in new homes or get set up for new home sales, it might be overlook some of the bad. Without knowing all of the details though keep your eyes wide open on navigating the analysis which it appears you are on the right track.
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