Hey all, newbie buying a park. This is my first adventure into multifamily. In the past I have dealt with single family and only a couple at a time. So, honestly as issues came up I just dealt with them and didn’t think about it much. However, this animal is significantly different it seems. The operational repair bill could be quite a bit larger than cleaning up a POH after a tenant leaves.
I know all parks come in different sizes and conditions. I have limited capital to get started, 300K with a passive partner or 150K by myself. So, that leaves me in the 400 to 800K category with 800 needing seller financing and a smaller down.
In this category of parks I have observed:
Rural, with older infrastructure, often clay, or concrete sewer lines to leach fields, galvanized water pipe, park roads in disrepair often needing additional drainage to remove the standing water and on a well system.
- Suburban parks connected to the city utilities, but usually galvanized water pipes, and roads that often have drainage issues.
- Most seem to have some deferred maintenance on the electrical peds and many are not sub-metered for water.
Of course, I haven’t addressed the POH and vacant lot capital needs yet.
With all the above said, I think I am a bit confused on how to plan my budget for starting working capital needs.
Do you have a standard ratio for WC that you try to maintain? I was thinking 60 days, but am not sure, maybe if the infrastructure is real old I should have 90 or 120? Or, maybe it just needs to be a minimum fixed number to get started, because stuff costs a lot when it breaks and is affecting the whole park. The number of days ratio might be irrelevant on a smaller older park.
Your wisdom would be appreciated.