Hello, I am looking for opinions on a potential purchase. I spoke with the owners of the park for about an hour the other day and I am interested in the park but I have not purchased a park for around 5 years and the market has changed to say the least.
The deal is two separate small parks separated by one parcel between them totaling 38 lots. It’s in a good state, 150,000+ metro and $170,000+ median home price. 3 bedroom rents are $1,500+.
The park has all city utilities, water is submetered. It is a clean park with mostly 1990’s homes, cement parking pads and sidewalks and asphalt roads. PVC water and sewer lines and underground electric. Park is fully occupied save for two park owned homes being rehabbed. Lot rent is $375 and includes lawn work. Market is $400+
There are two RV’s in the park. They are asking 1,595,000.
I like everything about the park except it is separated by a parcel and it’s less than 40 spaces.
Asking price seems a little rich to me. What are your thoughts? My basic math is 36 lots x 375 x 12 = $162,000 gross x .6 = $97,200 net
He does sub meter water sewer but I always use a 40% expense ratio even then.
So at asking price would be a 6 cap. Now it’s a strong market so the two vacant homes being rehabbed can easily be rented and rent can go to $400 day one which would change things to a 6.8 cap day one. Still seems expensive to me but I know caps have come down since my last purchase. Thoughts?
Using a $1,400,000 purchase price and day one numbers I’m at a 7.8 cap. What cap rate is appropriate for a park such as this in today’s market?