Lot Rent

Would anybody buy a park that rents lots for only $125? This number is in line with the market. If this is not a deal breaker, what other considerations should be made regarding this number as well as the market?


Gil Farnsworth

It’s all a function of price. Would I buy a park at $125 rents (with no room for raising them) at a 10% cap rate? No. At a 20% cap rate? Probably. One additional problem with low lot rents is that it’s often a sign of market weakness – low apartment rents and home prices. If that’s the case, then it’s back to no again. And I would run a test ad and the demand would have to be ferocious to make me interested. Final issue – can you get financing? Those kind of markets are normally not ones that most lenders want to get involved in.