📍 Looking for Input: Rural Alabama Park on City Utilities

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Hey everyone — first time posting here, and I’d appreciate some perspective from folks who’ve bought or underwritten parks in more rural markets.

I’m looking at a park not far from me that otherwise fits perfectly in my small buy box, but I’m struggling to reconcile the asking price.

Here’s what I’m seeing:

  1. Location: It’s in a rural part of Alabama — not near a major metro to say the least — so I’m questioning whether a 7-cap is justified. Am I off base thinking that’s awfully aggressive for a 63 pad park in the middle of nowhere?

  2. Cap Rate Applied to POH Rents: The seller (a reputable investor group from what i can tell) is capitalizing the park-owned home rents. In my experience, that only makes sense for newer units in a B+ or better community. These homes are rough

  3. Vacancy / Condition: Out of 63 pads, there are 24 homes sitting vacant. Some are total burnouts, and most of the rest aren’t worth saving. Between demolition and disposal, I’m realistically looking at a net of $0 from those units. If anything, they’re a liability.

My dilemma is this:
I really want the park, but I also want to be respectful of the sellers and the broker. I don’t want to offend anyone with an offer that’s well below asking — especially since I’d like to build a long-term relationship with this broker.

How would you approach this situation and am I out of line anywhere?

Thanks

— Shuff

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We do lots of rural properties in Alabama.

Shoot me a text and Ill go over the park with you.

Hardest 2 things to consider with a rural park is demand and maintenance.

386-846-4388

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Shuff,

I appreciate your desire to be professional and maintain a positive relationship going into the future with this broker- but they are not your friends here. If they are a ‘reputable investment group’ then they know what they are doing and are basically trying to sell you their mistake. They had a plan for the park and couldn’t pull it off.

7 cap is too high to price on and give you upside down the road. You are correct to not apply the cap to the rough rentals currently occupied and who is supposed to pay to have the garbage trailers hauled off and the lots cleaned up?

Just my thoughts but I would get on the phone and give @Dmaxwell79 Dustin a call.

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Dmaxwell79 and shuff. Please share your insights once you have talked. I think putting it up here helps all of us looking at smaller markets / rural areas that are not near yours, but your principals may apply.

thanks,

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here is my reply to the broker:

Hey Marc,

I spent some time reviewing the materials, and drove through the parks. While both assets have potential that I really like, I’m going to hold off on submitting an offer at this time.

A few key points:

  • It looks like a cap rate was applied to rent that includes both pad and home income. Park owned trailer rent cannot and should not be capitalized. Since a significant portion of that revenue appears to be coming from park-owned homes, that approach overstates stabilized value.

  • The 7% cap rate assumption is aggressive for a rural, C-class market.

  • The 19 vacant homes aren’t really an asset — if anything, they represent a liability given the removal or rehab costs.

  • The projected NOI for Park 1 appears low on operating expenses compared to Park 2, which suggests that the underwriting might not fully reflect actual operating costs (present or future).

I’d still love to stay in touch on other opportunities.

Thanks again for sending this one my way, and let’s talk soon.