The first problem you’re gonna encounter is that no lender will want to finance the park. Regulations have tightened and 30% occupancy is nowhere even near where lenders want it. You will want at least 60%, probably 70%. I’ve heard stories of 50% get financed, but you are not close to that either.
You will need the seller to carry the note, and they may or may not be willing to do that.
Well is OK, but you’re gonna lose income on that every year, and it requires you to have a better system. This usually means someone coming in to check it, test it, and if there’s issues, it can cripple your community. It’s not a deal breaker, but something that takes away value from the park for sure.
Lagoon is a big no. Not only are they getting banned in certain states, but it is a tremendous liability, and insanely expensive. What if it gets banned in your state or city and you’re out of options? You likely will have to pay more for insurance as well just from the fact you have it in your park. You also don’t know if it’ll stop working 20 years in… it could be much earlier, putting you in a terrible spot. Not to mention simply saving 250k for it could mean the down payment on a big park. You are far more on the risk side of the equation than on the reward side.
Filling lots is the most intensive thing to do in terms of capital, time and management. It also depends on the market. Is your park rural? Suburban? Urban? How is the economy near it? If the park is at a 30% occupancy, it could very well mean you are dealing with a location that won’t work, so can you realistically fill 70%? If it was easy, the seller would do it. but they didn’t. It’s your job to find out if this project even has the option to work, before you buy the park.
The reason filling homes is time consuming, is because finding a home at a reasonable price takes time, scheduling someone to go take a look then scheduling someone to move it takes time, then depending on the condition of the home, you may have to repair it, this also takes time and resources, and contractors aren’t the most reliable bunch, then you have to install the home and hook up utilities, which some moving companies do and some don’t, then finally once the home is in there, you have to market the home, find a customer which depending on your market could be easy or impossible, go through many calls and a couple showings, screen a tenant, then finally you have one more person move in. Chances are, you are gonna have to have your manager help you with this because you aren’t near the park, and managers can wreck your business or be a gold mine, so that’s another obstacle in there. It’s also another expense because a person who does that all well will have to be paid a certain degree of pay, otherwise you get what you pay for… As you can see it is quite the process.
If you’re buying this at a 12 Cap, this could work, but realistically you’re taking far too much risk for a 12 cap, and after saving for the inevitable capex, and dealing with an insanely long filling process, you’re at a 9 cap. There are safer, easier to run investments at a 9 cap even if they are difficult to find. In the end, is it worth the headache? You have to determine that. Personally, I wouldn’t. Too many variables. Again, there is more risk and not an appropriate reward. If you were buying this at a ridiculous 15 cap, then maybe you can make the argument it’s a bargain, but I don’t see it here either.
Also, you’re probably going to be burning most if not all of your budget in this park potentially, there’s an argument where you don’t want all of your eggs in this single basket. But that’s an answer only you can determine…
Hope this helps with some perspective.
