Thank you for your feed-back Frank. I decided to pass on that park and have found another that I am now under contract on that I would love to hear the forum’s thoughts on.
Here are the details:
$475k short-sale, management and repair turn-around
80 Spaces near Orangeburg SC (within a reasonable drive to the outskirts of Columbia SC)
56 Park-owned homes (24 rented at a lot rent of $150)
8 lot rents (again at $150)
8 empty lots
6 mobile homes that need to be removed
2 lots with vacant tenant owned homes
Valuation is as follows:
Lot Rent: 45% expense ratio on the lot-rent of $150 for the 32 rented homes for a value of $288,000
Mobile Homes: $3.5k per home and 56 homes for $196k
Total Price: $484,000
The Good News:
-Plenty of upside, even if I can just rent the park-owned homes
-Fair market lot-rent can be raised by $25 to $50 per month and is currently between 175 and 200.
-Each of the park-owned homes require only 1-2k of repair work
-Mobile homes are late-80’s to mid 90’s and include several double-wides.
-Lot sizes can easily accommodate today’s 90 ft long mobile homes.
-A test ad for a 2 bed, 1 bath, livable but not super nice, single-wide in of a similar ago the the ones in the park at $500 per month had a response rate of 30 per week. Most of the people indicated that meeting lessee requirements would not be a problem.
-I have reached out to several managers in the area by calling about their listing on Craigslist ads and several have indicated that they would be interested in helping to manage.
-The problem of low fill rates seems to be due exclusively to bad management and non-existing advertising of vacancies
-other management problems and high expenses are things that I have learned how to address through this wonderful form and will learn more after attending Mobile Home Park University
-Park isn’t local, but is in-state and ~2 hour drive
The Bad Aspects:
-Orangeburg Metro Area has ~90k people (but is within driving range of the outskirts of Columbia SC)
-Median home price is only 77k
-There are 6 mobile homes that are damaged beyond repair and need to be removed (stated by current management)
-Current management; book-keeping and billing
-City water but septic tanks. 3 units are un-rentable due to a problem with 1 septic tank.
-The remaining septic systems all likely need some repair and one septic leach-field appears to be clogged, “it fills up with water and needs to be pumped every month…”
-Financing: I have found short-term financing only at this point, 2 years with a 50% down-payment. I / management will need to fill 1 spot a month for two years to get to 70% occupancy in 2 years.
I think that the valuation is a good deal based on what I have learned and has plenty of upside to compensate for the risk.
Does this sound like a reasonable deal?
I will be driving there shortly and will be inspecting:
-the number and condition of the park-owned homes and other park-owned structures
-septic systems (to tell the septic companies which ones in-particular to inspect/quote)
-meet with current and potential future management
-determine fate of the abandoned and damaged beyond-repair homes
-talk with tenants about what they consider to be problems with the park and what they want to see done
Is there anything else is should be looking for when I visit in person?