How do people think about this? Am in contract on a park that has some land that could be sold for ~15% of purchase price, taking my proforma cap from a 10 to a 12. Rural town but in a metro that is growing very fast and with severe housing shortage. City definitely open to permitting more lots, but from a portfolio standpoint I have plenty of empty lots, so would be unlikely to do the expansion and would instead market to future buyer as potential to double park size. Any thoughts?
What’s the highest and best use of this parcel from your perspective?
If you already have enough vacancies, seems you’ve answered your own question…
You could sell the land and be done, or partner with a builder. You contribute the land, they do the building. There’s added value here by contributing the land.
Could be a double dip for you!
Keep us posted,
Mike
@mhp First find out what the land is zoned, that will determine how to proceed. If it is SFR (Single Family Residential), low density commercial or what. Then contact a local broker that deals with that type of product and see what they say the land is worth. I am going through this currently with a park and the seller just doesn’t understand that people probably won’t want a brand new stick built home next to a MHP. Frank told me that the land next to MHP is pretty worthless.
What are market rents in your area? There has to be a price point where adding additional lots is or isn’t economically practical.
@mhp This might be specific to you. I dont get the whole having a ton of empty pads. But i know people have that. What makes sense is going heavy on acquisitions then play catch up on infill. But I’m small but my goal is to get fully occupied right away.
So im not sure how good this market would be, and if thats the case, maybe it would carry minimal potential value to a future purchaser or if you are holding off on expanding, maybe down the road if its a long term hold in a few years market is poised for growth etc. Or if it gets you from 90 pads to 100 or 40 to 50 ( maybe not as significant ) so other intangibles that might result in a higher cap rate.
If you need the capital infusion or have use for the capital, that might have large value too. Ie , you sell it for 200k down payment on another park . Filling homes, developing sites can be worse than giving blood ( i kid i kid) but its where gains can be made. If you take that money and establish a position in a performing easy cleanup rent raise park , maybe won’t clip off a few years off the end of your life 
?
I really like @mhmike’s suggestion, and think given the empty lots you have in your portfolio you need to consider creative solutions for infill. A lot of people bash the Lonnie Dealer model because the bad ones are super bad, but the good ones are really good too. Watch them like a hawk until you know if they are a fit for your business strategy.
If you can find the right person (ideally multiple people per park depending on the occupancy) and incentivize them it could relieve the pressure and give you flexibility to pursue expansions, etc. I’d put the expansion on hold until you have the infill problem solved though.
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Thanks everyone. A lot of good stuff here.
@Deleted_User_ME My time is better spent acquiring parks at the moment. I don’t see that changing imminently for me personally.
I had taken the [current] “highest and best use” approach before creating the thread, but in an area where land is still relatively cheap but the MSA is growing incredibly rapidly, I think I’d rather hang onto the land than sell it off for something rather insignificant. I actually think the future highest and best use accrues to another owner that would like to expand the park.
Hope to revisit this thread many years into the future…
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