With a 30% increase in rents quickly I don’t see an 8% cap as a problem if all your other diligence is in order. Frank and Dave talk about their 10/20 strategy a lot, but they do 8/16’s and other variations where the market demands it.
I expect the question would be, “can you go find a great park at a 10 cap like this?” If the answer is not then it sounds like you have something worth getting under contract and digging deeper. Many times you will find out the way they operate the park versus how you would operate the park does not make it an 8% cap, but really maybe like a 7 or 6.
I would get a handle on what you’re going to do with that house and apartment…those will keep your expenses higher. Ideally you can sell it off and get rid of it. The Seller Financing sounds good assuming it does not balloon in 2 years.
What does the deal look like when you apply the easy upside in year one? By easy, I mean running your numbers using your business model and maybe a lot rent of $240. If the easy upside puts you at a 12-13CAP then it’s probably better than buying a 10CAP deal with no upside.
Other than being on the small side, this park is stabilized and sounds ideal (e.g. no POHs, public utilities). Great to have that much upside on the rents. So, are there any expenses that can be reduced to push your CAP higher?