Buying park but not POHs?

I’m looking at a park, 65 lots, $254 lot rent (market is $300), with 20 park owned homes, $1.42mm purchase price, city water and septic. The seller wants to keep the 20 park owned homes to give to his grandson “so he can get into the rental business”, the rest are tenant owned.

How can I mitigate my risk here? Would you do this deal?

For the price the seller is asking it won’t be worth it. Maybe one million with terms that all home must be sold to tenants within 3 years. You’re going to be holding the bag when / if this grandson isn’t a great Lonnie Dealer.

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Assuming a 35% expense ratio, 65 x 254 minus 35% would be a 128,778 NOI which puts it at a 9 cap. If rents were pushed to $295, that would be a 10.5 cap.

Other than the risk with the POHs, how is that not a good deal?

How much is your time worth? You asked if we would do this deal, and I am telling you I would not. 30% of the homes owned by an unproven landlord means headaches for you.

I appreciate you don’t like my answer, but you asked for feedback and that’s what this is. Every investor has different risk tolerance. I am not saying this is the “right” answer - I am saying this is “my” answer.

I appreciate your answer, I’m not saying it’s invalid, I’m trying to understand the reasons why, is it mainly because the POHs issue or the pricing? What cap rate do you aim for?

The park pricing on the surface is okay assuming the market is also decent. The question is how many cap points do you need to cover the risk (lack of control) of this kid owning 20 POH? For me it’s a bunch because there are plenty of stories how it can go wrong.

The main risks are the Lonnie Dealer is a slumlord and brings down the quality of the whole park, or alternatively they move all the homes out of the park and now you have an infill issue that is very expensive to fix. While the likelihood of those scenarios may be low, the impact is pretty high and could flip your park upside down.

Hope this helps.


20 homes owned by one individual gives that person plenty of leverage. Trying to control him will result in threats and intimidation, demand for lower lot rents, threats to remove homes etc. etc. I personally would not invest in a community with one person having that much leverage over my business.
As mentioned if the grandson is an A hole trying to enforce community rules will be difficult, if not impossible. Having 20 non owner residents creates issues you can not imagine in regards to community rules.
Allowing the seller to keep the POHs would be a absolute NO. Buying a park with 20 POHs would also be a definite No for me.
This is not a community I would invest in. I invest in parks not rental buildings.

Here’s a situation where the former owner retained 11 homes and very quickly began demanding a bulk discount and threatening to move their homes. Hope this helps!

JHutson’s points are valid on losing some control when you have 1/3 of your tenancy with one person. You’ve in effect got a minority business partner that can cause some headaches. That said, the dependency goes both ways. For him to move 20 homes out and reinstall them elsewhere would likely cost about $70k, presuming it was a close relocation.

On another note, if you do end up owning the park owned homes, it’s a valid risk management and ownership/management strategy to put the POH’s in a separate LLC. This can help with loan and insurance options, as both favor MHC’s with no/ fewer POH’s. Ask your loan broker and your insurance agent, …who is probably really smart, good looking, witty… and humble.