Need some deal input

I’m looking at a park right now that looks like a good opportunity, but there are some nuances.

  1. Roads: dirt/Rock. They don’t look like they’re in bad shape, but I feel like paving would greatly improve the look of the park. How do you decide whether to pave or not if there is no existing asphalt?

  2. Rents: all homes are POH. The tenants are paying rent and not lot rent. I want to convert them all to lot renters and give them the homes, however, because there is no existing lot rent the valuation is speculative. Does it make sense to establish a lowball lot rent amount and offer on that basis? How do you go about seeing if the tenants are willing to become lot renters and take ownership of the homes during due diligence?

  3. Entrances: The MHP has 4 streets adjoining it and three entrances. Is this too many?

Thanks for your input.

Asphalt and concrete are really really expensive. Given the POH situation I would make this a secondary consideration. I don’t think it’s a reason to not do a deal, just take care of the roads and consider some hardier material such as crushed concrete instead of gravel and dirt. I got a quote for a Park I had under contract for 2 inches of asphalt overlay and around 450 feet of road and the quote was something like 60K. This was only a 25 pad park. Gravel and crushed concrete is pretty cheap and a fine tactical approach until you get the Park turned around.

For establishing lot rent I would look at the competition to see what they’re charging, combined with the condition of the homes and capital expenditures needed. Personally I would set lot rent at the bottom of the market, and if the POH’s are in bad shape, tons of trees need trimming, water lines replaced, etc I would deduct even further to reflect that, or alternatively estimate the repairs as a one time offset towards the sale price. Either works and the conversation with the Seller is the same and you can be transparent about it.

I always get permission to interview the tenants during diligence. Just ask them. Sometimes Sellers won’t allow you to interview them at which point I just assume that you will have to non renew most of their leases, repair, and resell. If the test ad does well and you can afford rehabbing the units it’s a non-issue.

How many acres is the Park? If it’s 0.25 then that seems like a lot of entrances and maybe close one off, but if it’s 5 acres I wouldn’t worry about it. I have seen a 0.75 acre Park with 12 homes and 3 entrances. 3 was too many, but not a deal killer.