Value in Deal?

Hi, since I know a lot of you have much more experience in looking at park deals than myself, I thought I’d throw the basics of a proposed deal for review and see if some of you could offer some feedback/advice…

The park is older (established late 50’s) sits on 4.5 city acres in a nice semi-commercial area of medium sized city with city water and sewage. It’s been in the same family since its initial establishment. It currently has 32 single wide rented lots at $300/month (average in area is $240), a single family home (2/1) and another 12 vacant lots. It’s overall upkeep is fair, but some of the lots (both vacant and occupied) are shorter than ideal (approx 50’ long). The expenses are high (over 60% last year), but over 25% of this is water/sewer which the park is currently paying. The owners have indicated that $500K would get the deal done, but they won’t accept less. Based on the current net income this would produce a less than 8 CAP deal which is definitely not ideal for a park of this size and age, however I see upside based on normalizing the expenses and filling several of the larger available lots. I Realize that a lot of due dilligence is still needed and required to fully evaluate the deal, but based on these limited facts can anyone offer some feedback? Any input is greatly appreciated. Thanks

Rick Bergman

rbergman@columbus.rr.com

Rick,

Suggest you proceed carefully. You need to look really carefully at the physical infrastructure of this place. Chances are, since it has been in the same family for so long, they haven’t done any real upgrading. After 40+ years, systems are at the end of their useful life. A big part of that water/sewer expense may be leaking galvanized pipes. If you own the electrical system in the park and it is original, RUN away as fast as you can.

There is a recent post regarding DD. Check it out.

The 50’ lots are pretty much worthless for SWs. Can the park be re-configured(without spending a fortune) to handle 16 X 80’s? If not, its market appeal may be limited.

Unless there is a compelling reason to own land in this area (future development potential), I can’t help but think you could get a better deal elsewhere. There are a ton of these parks from the '50’s still around and they can be money pits. I know this all too well as I used to own one. If you get a deal that is too good to pass up, then maybe this place makes sense.

Good luck.

Rolf

Did you ask them how the arrived at the asking price.

Probably a cap rate of 10 to 12 would be more in order. The lot

rent is already above average so theres not much room there.

You could install water meters to offset some of your cost but

that could cost you anther 10-15k up front. If this is your first

MHP deal I would suggest you seek professional help on the DD,

then lowball them on the price. All they can say is no.