One Tenant Park 30+ units


#1

Stumbled in to a deal where owner of the park sold off all POH’s to an investor. Park only has 2 vacant lots. Investor basically cuts one check every month whether homes are filled or not. Park is submetered and has very little expenses. We just got under contract so am starting to make a list of some negatives here that I might not have thought off.

Appreciate any feedback.


#2

Wow. This would be a tough one. This investor basically has all the leverage and the park owner has none. Any attempt to raise rent will be thwarted by the mere threat of him pulling out all his homes. In fact, you may buy this and on day 1 he could insist on a rent decrease or he gets a crew to start loading homes up.

Another big problem is financing. Unless the seller will carry this I can’t see how you’d get a bank to commit. The only way I’d consider this would be if I could buy at a screaming price (read: minimum 15+ cap) with very little down (~5-10%) seller carry.

Best of luck! Let us know what happens.


#3

Yep, Chads hit it on the head. Too much risk - what happens if he decides to pull the homes out? I would not want one person/group to own more than a couple homes in the park. Additionally, he mentioned the financing - banks will have a real tough time with that one too. Those are the two biggest negatives in my opinion.


#4

IF one investor purchased all the POH WHY would he not also have bought the park since he would have a front row seat to purchase the property at a reasonable amount???


#5

Thanks all for your help. Actually I backed out of the deal. I really wasn’t to concerned in this case about the tenant pulling all his homes since it was 30+ but its a legitimate issue. I pulled out of the deal because after I received a copy of the lease with the tenant it didn’t explicitly allow an out. It was automatically renewable after 12 mo. In addition, they had agreed on a weird utility split which basically had the park donating utilities to the sub-tenants.

Thank goodness for good DD and this forum.