I am looking around the Wichita KS area and noticed that there are many large parks that have lots of vacant lots. Is this a red flag with respect to purchasing a park in that metro area?
Not necessarily. I have seen a lot of those too and many are very mismanaged trailer parks.
If you follow the usual steps in the MHU Due Diligence Manual you can find out the answer. Look up the data on bestplaces.net to vet the market and rental demand. Use a test ad to confirm the going rent rate and demand for the area. Look at comparable parks - are all of them really half full or just some of them? If you do these things you can find out if a park is mismanaged or if the area has problems.
I came close to purchasing a Park outside Kansas City and it had great demand, but it was a very big turnaround Park and the capital expenses it immediately needed could not be absorbed at the negotiated price. There was also a very limited contractor pool to perform rehabs, which I probably could have figured out over time, but initially it was a turn off.
Lots of threads on these steps doing some searches.
These are nice parks with newer homes, groomed lawns. Not just one park that looks like this, but several. I think anyone with that kind of money would be capable of managing a park. I imagine the demand is lower than supply of lots. I guess I answered my question this is a red flag and should dig deeper, but wanted to get thoughts from experienced buyers. Wichita has had some major employers move.
FIY I do have the due dillengence manual.
The test ad will really tell you what you need to know. Maybe their lot rent is too high, maybe the homes are so new that the rents are too high and the market is better for 1980’s homes. If you play with the ad you can usually find the sweet spot for where the demand is, if any.
There is huge demand for affordable housing in Wichita, Kansas. Any park-owned home that the park owner brings in will rent/sell pretty fast. But many moms & pops have no interest in buying homes to fill lots, so that’s why there are so many parks with vacant lots. Even the larger operators often lose interest in the effort-consuming filling of vacant lots once they have hit stabilized occupancy of 80%.
So don’t let the vacant lots be your guide, as that’s a function of supply of homes and not overall demand. The test ad results are much more important.
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Hi Frank,
It’s been about 3 years since your comment about Wichita above. Do you still hold the same opinion? I have a 100+ space park under contract in south Wichita now. It currently has 80% occupancy, which is similar to the surrounding parks in that area. The Wichita market appears to be a solid place for a MHP - MSA of 600k+, median home price of 125k. However 3/2 rent appears to be closer to $850 rather than the benchmark of $1000. Does that give you pause? market lot rents are about $300. Any thoughts are much appreciated!
Thanks!
Jim
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I had a property in contract there recently and decided to back out strictly due to the market. I talked with other owners are were more familiar with that market and from what I can gather, it’s pretty competitive, cut-throat market. I’ve heard owners will poach tenants from other parks in that market.There are several parks that have vacancies and this was due to ARC owning some parks and filling vacant pads to just about whoever applied. Then in 2001-2002 they all left and they’ve remained vacant since. I wasn’t comfortable with it, but I think it just comes down to your test ad and how you perceive the appeal of your particular park. You just have to be comfortable it might be harder than you think filling the vacant lots, but maybe that’s ok.
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