Help with Park Valuation

I’m looking to purchase my first mobile home park and would appreciate any feedback on a deal I came across:

Good location: metro area with a population of several million, median home prices $250k, median 2br rents over $1,200. Within easy driving distance of my home.

45 occupied lots (100% occupied)
No park owned homes
Lot rent of $550 / month (there are some parks in market with lot rent as high as $600)
City Water
City Sewer
Tenants pay water
Paved roads
Parking pads
Seller stated NOI is $225,000
Asking $2.9m

Appreciate any feedback or advice you could offer. Thanks!

Put aside the numbers and the (gulp) $2.9 million asking price. Seems to me the park has been very well run. Fully occupied. No park owned homes. Lot rents near the market peaks. My question, as a buyer, would be: What can I bring to this deal to add value to the park? Ideally, and maybe this is more a reflection of the type of investor I am, I would like there to be some upside opportunity, something i can bring or do to the park to help increase revenue, and by extension its value. I’m not sure i see it here. You’re basically buying a park that is probably at or near peak efficiency – and that means you can only keep it as is and running well…or not, and lose value.

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They are advertising around 25% expenses, which is probably low but maybe it’s legit. If you want turn key and everything checks out, sounds nice. 7.7% CAP is lower than most here are looking for, but if that fits your investment goals, I’d make an offer. Check with local brokers to see what the going CAP rate is

Thanks for the replies. I appreciate it.

I like what @Nick1 said. It depends on the type of investor you are and type of deal you seek. I think you should really verify the expenses with a magnifying class. Something priced like this also need to have no deferred maint/capx needed. With lot rent “as high as 600” , i would just verify that if its one park , not an anomaly and no additional ammentites. Id personally like to see lot sizes that can take a full size SW home as well with such a retail price on it as well. Some markets are really desirable and thats what happens to pricing but just know that its not really a value add deal but that does not mean its not right…

Lastly, keep in mind of cap rates as they relate to interest rates and take that into account if you are negotiating seller finance terms or placing debt against the deal.

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I checked the parks within a 15 minute radius. They are all fully occupied and none have amenities. Lot rents were $450, $520, $610, and $650, so this park is right in middle. I would also put it right in the middle in terms of location desirability and aesthetics.

Expenses do seem very low at 25% and I agree there is not much upside to income other than pushing rents 10-15%.

I’m going to request financials and see if I can get him to come down at least 10% on price. I like the deal at an 8-cap, but I think the NOI number he gave me is an absolute best-case scenario.

Thanks for all the replies. Very helpful.

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