Help needed with due diligence

I just came across 2 parks being auctioned together in less than 2 weeks. There are a total of 328 lots. 190 are occupied. No park owned home. Public water and sewer. The park is less than 5 miles away from a park owned by Equity Lifestyle Properties and their park is massive(1100+ lots). From a satellite image it doesn’t look like Equity has many vacant lots. Even with the huge number of vacant lots in the 2 parks being auctioned, I feel I absolutely have to pursue this. I can set a limit as to how much I am willing to spend on the parks and see where the bidding goes. The opening bid is $1,200,000. I own 3 parks about a hour away with high occupancy, so filling 138 vacant lots would be something new and challenging. Any help or suggestions would be greatly appreciated. Have a great holiday everyone!

We have bought several great deals at auction, and it all depends on how many people bid and how high they’re willing to go. On the occupancy, if the park is 328 and you need to take it to stabilization rate, then you’ll have to bring in 72 homes (262 - 190). At $25,000 per home on average, that’s going to cost you $1,800,000 in cash, or $600,000 if you can do it through the Legacy Park Finance Program. Run a test ad and make sure the demand is there, as that’s a lot of homes to sell.You need to buy the property based on only 190 occupied. You need to get a great deal, as the auction format has risk involved (there’s no way you’re going to get all your diligence done in under 2 weeks). Does the park already have a Phase I completed? Is there a survey? These are things you need to see before the auction, if possible. When we have bought at auction, we demand a huge cap rate to make it worthwhile – a 10% cap rate will not do.Having ELS nearby is a good affirmation that the market is good, as they are no idiots and run a tight ship (the only REIT that I would give that praise to, in fact).

How do you find parks that are being auctioned? is probably the #1 source, but there are even parks on eBay. 

I have some additional information I was able to get today.

The lot rent for both parks is between $374-$385

NOI: $324,665

Phase I has been completed and there are no issues other than possible asbestos and lead paint in the leasing office

There are surveys for both parks

What CAP rate should I shoot for? And as far as the test ad, should I advertise new homes for sale or new homes for rent?

I really appreciate your help

190 x $374 x 12 x .6  = $511,632, so I think your $324,665 number is off, assuming you have 190 occupied lots at around $374 lot rent (just a ballpark). If you could by this deal at a 15%+ cap rate, it might be a home run. But you need to get a better handle on the actual net income before you start bidding. Maybe they have a huge administrative fee in their numbers, or they had some extremely high water bills or repair costs. Whatever it is, you have to do your diligence before the auction on the numbers. On the vacant lots, that’s going to be a challenge, and that’s why you need a high cap rate to make this deal worth the work and worry.