Too small / rural?

I have been on the hunt for my first park. I would like it to be close to where I live (for my first one).

I have made some offers, but at this point nothing came together.

I recently came across one that is not too far from me.

Here is the scoop:

VERY small town (population under 200).

BUT under 20 miles to a military base (would be an opportunity bring in units and fill them).

Under 30 miles to a city of 50,000

Clean park, pretty well maintained.

Total of 30 lots, 14 spaces rented. Current owner did not bring in new units as old left.

Rents are $100 a month (regional rents are around $300)

Park charges $80 a month for water / sewer (both are city)

Selling price: Under $150,000

Seems to be some upside to rents, clean park, but VERY small town, price is good.

So what are your thoughts?

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Definitely run test ads, make sure the metro will support the park. If the owner will finance that will mitigate your investment if it’s a dud and you have to give it back. Check other competing parks in the area for real rent comps.

Run test ads on the base also if possible. There may be a base laundry or something to put tear strips to test interest.

Look at the current tenant base. Who lives there…how long have they been there. Maybe ask the owner how they advertise to get an idea if they’ve already tried what you will use.

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Do you usually run test ads during due diligence or before?

Rents in the large town nearby are $1000-$1400 for newer apartments, and the market is tight.

If the deal looks like it may be a go lock it up and run the ads during diligence. I’m in diligence on one right now and have my ads going. I used the area paper and craigslist simultaneously.

How are you going to get your rents up to $300 (e.g. how many of the tenants are on a fixed income and going to report you to the Jon Oliver show when you raise rents)?

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Great point. I didn’t look at the numbers initially but you have to use current rent amounts unless you are absolutely sure you can raise rents immediately. 14 X $100 - 30 % expense percentage X 10 cap = . I’d say this should be closer to $110k at a glance.

Not bad if you were going to run this park for the rest of your life. If you intend to work to bring it up and then sell it, it will be a tough one. In addition, you will have a problem either legal or with vacancy if you went from $100/mo to $300/mo. I just think the area is really too small.

There is a play here though…I’d only buy this thing if I could fill it with full time RVers and sell it a year later (also assuming there is demand to fill it).

You won’t be able to raise that sweet $100 lot rent. And in a town of 200 the city council members may reside in the park and make you pay dearly if you raise it up. Don’t risk that in a small town.

One separate item, a flat water and sewer charge might be illegal, especially if the park is making money on it. You’ll need to start submetering or allocating to get back in compliance. Check your state PUC regulations.

Town size doesn’t really matter. It’s the MSA that does. My first park was in a town of 1k and has been a homerun.

Sounds like it should work if test ads pull and you can get rents to $200+ in nearish term.

My ideas.
I am more of a buy and hold guy (10 years hold time frame is my plan). Not as worried about appreciation as the purchase price is so low. Even if we filled in 5 units the value would rise strictly on a CAP basis.

I would buy the park, sub meter water, bring in new & used units, put up for sale (repeat as long as there is demand). Set new unit rents at $200 + sub metered utilities.

Existing units get sub metered and billed for usage, (get rid of monthly flat rate), and raise rents $25 a year for 4 years. We would let people know this when we take over that rents will rise $25 a year.

Yes I am aware there would be some blow back, but these folks are getting a stupid good deal on lot rent and they probably know it.

I did do a little research, the parks in the town of 50K, are getting $400-$500 a month with water, sewer, and garbage.

Thoughts?

Hmm. Everyone talks about bringing in used units, but here in Georgia they are far from plentiful, IMO.

Renting to military is tricky. How big is the population? What percentage of the base population gets a voucher and lives on the economy? Are they likely to be single guys looking for roommates or an older base population with kids looking for 3/2s?

Sounds like a good learning opportunity if you buy right.

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Long term RV. Any other RV lots in the area? The long term RV community love the larger lot sizes that mhps provide. You can also charge a bit higher space rent due to the transitory nature of RVs. Sounds like a fun investment. One of my parks is very, very rural. 100 miles north of nowhere. Had a home relocate and had a long term RV person offer me 450 per month for the spot. 150 more than my current pad rate.

Thanks for the feedback and ideas

@Wanderer - Just remember that you can’t evict someone in the military if they’re deployed.

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On the market stats, you need to go to www.bestplaces.net – that will show you exactly what the metro population is as defined by the U.S. government. All buyers, bankers and appraisers use this same data, so it’s the place to get those stats.

The normal stats that everyone wants are a 100,000 metro, a $100,000 single-family home median and a $1,000 per month 3-bedroom apartment rent.

Look it up and see how you fit in. The above metrics are based on metro NOT your small town. If there is a metro to your small town, it will be found directly under the main info box in the middle, and will say “metro: ________”

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Deployment is always possible, but you should request orders as proof of the deployment. On the other hand, commanders take a very dim view of service members turning deadbeat.

Short notice deployments happen, but they aren’t an every day thing.

@Wanderer - Yes, that’s very true.

@Corbay, as per your post:

  • “VERY small town (population under 200)”
  • “BUT under 20 miles to a military base (would be an opportunity to bring in units and fill them)”

Our Turn-Around Mobile Home Park is located approximately 20 miles to both a Military Air Force Base and a Military Navy Base.

Our Family loves the Military and is very thankful for their Service.

In the past we have rented Mobile Homes to at least 4 Military Members - all wonderful People and great Renters.

The problem with the Military is that they do not stay around for too long.

All our Military Renters stayed for less than a year each (not their faults…Military just likes to move their People around).

Thus, even though we love the Military, love the People in the Military, love that they are great Renters, the turnover is hard on Rental income.

We wish you the very best!

Having been military for over twenty years and going strong I totally agree. One of the great this about MHP is the fact most TOH tenants stay for over ten years, and on average. If you have military the turn over will be more akin to and apartment complex.

So if you are good with POH business model and the upkeep on the units and turnover go for it.