Evaluating property- where is the risk?

I’m wondering if anyone would give me their thoughts on this park.
On the surface it looks good to me. But it’s been listed for a while so I’m sure everyone has looked at it and passed for one reason or another.

I’ve been listing to the podcasts, doing research and this location passes the preliminary tests.
MSA pop 365k, City pop 18k, Walmart within 5 miles, Unemployment 7%, Median Home Price $100k, Median income $30k, Housing Vacant 16%, No POH, 22 spaces, 20 rented @150, 1 house rented at $500, 1 garage rented at $300, residents pay direct for all except septic, some are shared, onsite manager gets free rent, 3 years of expenses are at 30-35%. Listed at 8.4% CAP. At 10% CAP value is about $240-250k.

Thanks in advance

Let me also add that that this would be my first park. I’m currently a buy-and-hold investor of single-family houses. I’m selling a loser and looking to put the money into something else. I was considering small multi family or a small entry-level park like this.

The fact that this is on loopnet concerns me a little because everybody says you can’t find a decent park out there. But I realize this one is small and many investors might not be looking for a park like this in that area. The other thing that concerns me is that the owners bought this property in 2008 for $380,000. The park is permitted for 63 properties but the way it’s laid out you could probably only squeeze in a couple more. Maybe the current owners thought they might redevelop it and put all 63 lots on this. I’m not sure. But the decline in price concerns me.

I know others are also looking for value add in this park has very little of that. I’ve been told runs could be increased by 15% but beyond that I can only add a couple other houses so there isn’t a huge upside. But that’s not what I’m looking for. I’m looking for stable cash flow and does buy-and-hold.

Just on simple metrics, $150 per space is very low. 35% stated expense ratio is low on top of that. If you are SURE you can make ends meet that way, that gives you 20 * 150 * ,65 * 12 = $23,400 per year in net income not including the garage & house.

You need to build your own expense metrics and our banks figure $50 per lot per year for reserve, so you might take that into your expenses and also any deferred maintenance (current owner has not been doing any, right?)

And you need to make sure you can keep the park full if half your tenants leave because you [insert reason here – raise the rent, enforce the rules, collect the rent, etc]. TEST AD.

Local housing stats concern me and low lot rent. Is there demand at lot rents that make sense (now, and in 10 years)?

What are the competitor parks doing and how will you compete with them?


I own 2 parks in that area. Both about that size but also both having private utilities. So that park is worth a bit more than mine due to water billing. My comparable was purchased at 130k but that was a case of an old park operator not realizing his value.

I like that park at 200k but not at that list price.

As far as it being on the market so long, there are a lot of parks in the 4 county area and plenty are for sell. That’s why we bought there because the cash flowed well compared to cost. But I don’t see much upside for exits.

Highly recommend Tony Colella as an agent for this property. Knows his stuff and used to post here a bunch.

$150 lot rent is close for that area. We get about $200 at best for that area.

Happy to talk offline also to the OP about the area if needed.

When I said $150 was very low, I meant compared to from where I’d be comfortable extrapolating a 65% expense ratio.

You cannot guarantee yourself a certain expense ratio and there is a minimum amount of service you have to provide. And you cannot expect the expense ratio to be completely linear with respect to rent. So while an expense ratio of 60-70% is fine as an estimate (per F&D’s formula) in practical terms I think you would tend to see higher expense ratios with smaller parks and lower lot rents. There are economies of scale that are lost. So be very careful about the numbers you budget – the gross income is dictated by the market rent, and the expenses are dictated by “conditions on the ground,” so to speak.

Assume the seller has “massaged” the numbers to make the expense ratio “look right.” You need to figure out what your expense ratio will be (in the form of actual numbers based on quotes (or existing records of seller). Keep in mind the tax assessment may change upon sale and, on average, there will always be some catastrophe or another to plan for or clean up from. I would build that into the cap rate as a perception of the risk of the investment (demand higher cap rate or lower price for increased risk).


I’ll PM you. I appreciate the local knowledge and help

I’m working off a trust but verify mantra. Will definitely see if anything is missing from expenses.