I am currently in the military and am waiting to get discharged due to some injuries. I have been looking for a park for some time now as it will allow me to work for myself when I get out and allow my wife to be the stay at home mom she dreams of being. I’ve been able to live out my dream now its time for her to do hers. I have found a park that I believe is worth looking into some more. I am curious if I could get some advice on it.
It is a 42 space park in a city of 30,000. There is an Air Force base about 10 mi down the rd (large contributor to the local economy), a large VA hospital, and of course a Walmart. Currently 39 spaces rented, space rent is $180, with 12 park owned homes rented at $500. $180 seems to be middle of the road for the area. My plan would be to get the poh on a lease to own contract immediately. The park is listed at $650k, I came up with a value of $500k. I have spoken with the owner, he currently lives in the park and manages it. He turned it around from a drug dealing park to a more homey park. About a 3rd of the homes are metered for water, he doesn’t charge them though as he doesn’t believe its fair to only charge a few people and not all for water. Only one unit is back due on rent. Electrical needs to be updated to code for each unit. And there are no issues with the sewage. Here is a little more info about the area. Any info would be great. Thanks in advance.
Median home price - $125,000
Unemployment - 5.6%
The population dropped 5k from 2009 -2010, not sure why.
Your estimate of value is correct at a 10% cap rate, and you then add the value of the homes [$8,000 each would be roughly an additional $100,000]. But then you also have to subtract from the value the cost to upgrade the electric and other capital improvements. $650,000 sounds high, based on this. But you’ll have to see what you can negotiate.
That being said, what is your upside on the park? Raise rents? Fill the last few spaces?
Is the seller going to carry the financing? For how long? Is this deal capable of getting a bank loan?
As a wounded veteran, I will happily send you a free copy of our 30 Days of Diligence course if you can get this park under contract. That should help you stay out of trouble on the due diligence. Just email me at frank.rolfe@gmail.com.
Thanks for serving our country and good luck on getting this deal negotiated.
I’d talk with the local Chamber of Commerce and some local business owners to get a handle on the declining population. I wonder if that is caused by the military shrinking? What if that AFB closes? I’m leery of one-employer small towns.
Frank’s ‘30 Days’ book will be a big help. But you are going to have to go ‘press the flesh’ and talk to people in that town to understand what is going on with the population.
Thanks for the comments. It is much appreciated. Emailed the chamber and the VA. Its interesting because the hospital just got some major construction done which made it a pretty large hospital for the population.