I’m looking to buy my first park, and I’ve found 2 that are for sale together. First park was originally zoned for 40 lots, but the current owner says that’s when mobile homes were smaller. Now it’s likely only 30 to 33 lots in all. Fourteen lots are occupied with all but 3 are tenant owned.
The second park is smaller, but just down the road from the first park. Fourteen approved lots, but only 12 may be useable. The other 2 lots are in some form of a flood zone. The seller says it’s a 100 year flood zone, but I’ve not yet verified this. Seven of the lots are vacant. 4 park owned homes, 2 tenant owned homes.
The only utilities both parks pay for are street lights and weekly dumpster pickup. Every lot is on city sewer and water. The metro area is over 500, 000. Lot rent is currently 155 to 175 per month, but I’ve gotten decent replies on my test ads advertising the lot rent at 200.
The owner is saying 315, 000 , owner finance at a 30 year amortization, balloon payment at 5 years, and 10 percent down.
I realize I’m going to have to put some work and money into these parks, however, they are in a good location- 5 miles from downtown in a major city. I’m not sure how realistic the balloon of 5 years would be, but I’m thinking to start out, a home at a time, with the Cash Program, and increase the occupied lots like that. I’ve offered him 1. $240,000 with 10 percent down, 2. 300,000 paid at 2500 per month for 10 years.
He still refuses to go under $315,000. Is it worth what he’s asking?
Does this sound like a good deal? Thanks!
20 x $155 x 12 x .6 x 10 = $223,200. There’s no way it’s worth $315,000. But I have bigger concerns than just the price.
The occupancy is terrible. As a result, there is little likelihood that you can obtain bank financing. Banks typically want you to be at 80% occupancy.
Another problem is that you are going to have twice the third party reports – Phase 1, survey, etc. – since they are two separate parcels. That’s another big turn-off to a potential buyer down the road.
And I would not be too confident on the CASH deal here. Those parks do not sound like something that would work well, as the properties are small, highly vacant, have low lot rents, and I’m guessing are not in the best locations.
Personally, I think you can do better than this deal at the prices being described.
Frank, the lingering uncomfortable tummy ache I’ve had this week went away when I red your post. Thanks for taking the time to respond and for pointing me in the right direction.
Glad I could help, but I would like to point out that Dave and I are big believers in “gut instinct”. If you don’t feel 100% positive about any deal, then don’t do it. In this case, your “gut instinct” was 100% correct. Every time that we’ve allowed ourselves to buy parks that we did not feel 100% good about, it was a disaster. So what can change your “gut instinct”? Little things. For example, driving to the title company to sign the papers and seeing in the newspaper that the largest employer is shutting down. You are always better off bailing out than closing if you are not feeling fantastic about the purchase.