Advice on a deal under contract

I need some advice on a park in the midwest that I have under contract. I just made my due diligence trip to visit with the sellers. Like a lot of original owners, they developed the park and are quite old which has in turn provided lax tenants making payments on time and overall mgmt due to heath issues and time devoted to the park. They have outgrown it and it has become an issue to deal with. The downsides I found from my original inspection was that there are 3 more vacant spaces than I originally thought - with 2-3 possible homes that are currently lived in but could use a tear down in the upcoming years depending on your quality of ownership - and there are ten 3rd party/investor owned homes in the park.

30 spaces

23-30 rented - lot rent $100 each - no POH’s

City Utilities - Tenants pay all utilities

Purchase Price - $110,000 + all closing fees (2-3k) - financing approved ($105k loan amount - 15yr. am. - 5 year balloon - fixed @ 5.5%)

My plan would be to raise lot rent to $125 and also consider putting more funds down upfront to reduce the loan amount but would like to save some reserve money for issues and homes.


Seems to have a good yield even with the vacancies - lot rent increase, new mgmt and systems, new homes over time are only upside.

The amount of cash to put down on the deal is minimal which enables a nice cash on cash return. (leveraging other properties if needed to reduce down payment if needed.)

All city utilities and the tenants pay them direct. The main objective is to keep the park clean and successfully put a rent payment and rules system in place while filling vacant lots over time.

I think the park could be nice with new rules, mgmt and cleanup. Just not sure how much money it will cost to get there. It is not bad now, just mainly mgmt cleanup and new systems and rules.


*The Sellers have no idea whom the tenants are living in the homes that are owned by investors but lot rent is paid.

*The amount of 3rd party/investor owned homes is concerning regarding the risk of abandoned homes if lot rent is raised or the home owner’s tenant moves out, which would cost a lot more to repair/replace home for new occupancy.

*I don’t have a TON of reserve cash right off the bat to fill the park with homes (7 vacant). To increase/maximize cash flow and return money needs to be spent.

*Raising lot rent to $125.

I am sorry for the novel but would like some advice on the deal and mainly the concerns I have posted. Also, a big thank you to Jefferson for his help over the last few weeks.


Michael -

This sounds like an interesting deal.


23x100x60=$138,000 value (or more if the tenants pay water/sewer direct), and it has upside from there.

As regards rent, my gut would tell me that $150/mo. is the next logical stop for rent. I think you are being too conservative at $125. The investor-owned homes need to be investigated, and you need to meet with the owner of those homes to determine his interests and if you can work together. But we have investor-owned homes, an not one of those has ever moved out (knock on wood).

The mom-n-pop owners sound like classic mom-n-pops. I think there is a lot of upside in running the park professionally (no-pay no-stay, advertise on CraigsList and in your largest local metro newspaper, get a website, keep an honest set of books, etc.).

The one thing your posting does not cover, is the economy. Run the property’s town through to determine:

  1. Is it part of a 100,000+ person metro area?

  2. What is the unemployment rate? Less than the national average?

  3. What is the household income? At least $40,000?

  4. What is the average home price? At least $100,000?

Ultimately you need to do an ‘acid test’ on this property. That means running an ad (both in that large local metro-area paper, and on CraigsList) and see how it pulls. Right now (the Thanksgiving-to-Christmas season), it will not pull well. But by the first or second week in January when everyone is getting their tax refunds and thinking about moving, your ads should generate 3+ calls/day. If they do not, then this deal is probably not one you want to do. You need to have interest from people to move in to the community. But if you are getting a decent call volume, then this is a deal you definitely want to do.

Let us know how your research goes, and let us know how your test ads pull,


I agree on the ‘Acid Test’ but I would add that you should go to diffrent places and get a feel for the towns thoughts on the park. For exampke the talkative lady at the gas station, someone at the court house, health department etc…

If the park has a slum name for its self,then that is what you will collect in renters and a reputation takes along time to change.



Have you looked into what some of the other parks in the area rent lots for? Make sure you compare apples to apples on who pays utilities in the competing parks.

This will give you a good idea of a what the market will pay, and what kind of upside you will have.

Good luck!


Yes, I have looked at other lot rents and it is right in the middle. However, everyone I have spoken with to this point that owns homes understands the business and is waiting for an increase. I was more concerned with the number of 3rd party owned homes, and any vacancies which result in additional funds to deal with title 42 if homes are vacated and the fixup needed to get them back up and running. However, I don’t think it is a big issue after talking with a few of the home owners over the past few days.

Hopefully I can find some used homes to fill 2-3 lots over the next year.