So here are the details. Park is in a tiny town, and has no MSA to speak of. Population of ~1100. ~8% vacancy for homes in the town, and a median home price of $141,000. City utilities, which are master metered. All the sewer infrastructure has been redone within the last two years to PVC. Upgraded all electric meters as well. The park is a mix of 25 RV spaces, and 20 mobile home sites. Apparently, the majority of the income comes from the RV sites in the months of May-October, and a large percentage are hunters. 90% occupancy throughout those seasonal months, but otherwise the RV income is shut down the rest of the year. The mobile home side has 12 long term tenants who pay $225.00/month. I haven’t run a test ad, but I think it’s safe to say that the demand for the mobile home lots will not be outstanding in the area. The interesting caveat though is based on the most recent tax returns, the NOI puts the park at a 15% cap rate. There is also plenty of acreage to expand and add rv/tent sites if the demand during those summer/autumn months warrants it.
My questions are as follows:
Aside from verifying through bank statements and tax returns, what steps would you all take to identify the true income from the RV side? Secondly, would a 15% cap rate compel you to invest in a market that is extremely small, and relies on an industry that may or may not be sustainable?
Thanks in advance for any advice