I am trying to find the correct cap rate for a 50% occupied park in an amazing location with tons of demand.
Roughly 35 TOH @ $300 with 35 lots to fill. Current owners have not attempted to fill lots for decades and it has slowly emptied and looks a little worse for the wear. However I have already run ads and gotten great responses of 30 inquiries over 2 weeks.
Master metered water, other utilities are direct billed and historical expenses are 38%.
Park is lake front with tons of demand for those who want to live at the lake, retire and live at the lake, or buy a vacation home at the lake. Park is directly across from a popular marina and has tons of drive by traffic. I could fill it to 100% capacity by the summer if I chose to rent to RV’s.
As you can tell the lake is a big part of this. Prices lake front have soared the last several years pricing most people out of the market for lake front stick built homes. Park is directly across from a popular marina and has tons of drive by traffic.
Local population is 50,000 and growing 3% a year, but is one hour from a metro of 1 million. There is a lot of demand for vacation homes on the lake. All lake front parks that do advertising and try to fill their lots are 100% occupied.
I would need to buy with legacy or use the CASH program to fill 35 lots. Due to the demand I think I could do this in 2 years but logistically I still have a day job so lets assume 5-7 years.
Everything looks great, but I need to not overpay on future promise.
So what is today’s cap rate I should be willing to work with?
Great to hear. A few questions. Have the 50% vacant lots been used for RV’s or completely vacant? Is $300 top of the market rent for this particular area? Is this an off-market deal and you’re directly working with the owners?
There are a few long term RV’s above the 35 number. I think the management gave up a few years ago and took down the sign with a phone number on it because they didn’t like answering questions from all the short term RV rental inquiries they were getting and would rather be empty than deal with short term RV’s. 100% of RV parks that take short term rentals are fully occupied from May - September and this park is in a better location than most.
Okay, so it’s on the west side, the better side. 38% expenses on the entire park? If that’s the case, that’s pretty damn good considering the expenses associated with 35 vacant lots is usually a lot higher with regards to landscape/taxes. What is the negotiated price?