I’m making an offer on a park, it will be my first. Want to get feedback from the group.
Here are the community stats
Metro pop 280,000, up 12%since 2000, up 25% since 1990
Unemployment 4.8%
Median family income $53,000
Median home price $101,000
22 lots, 19 tenants, no POH
Avg rent is $197, avg market rent $214
Rent includes city water, private septic, trash, lawn
Estimated expenses are 49%
I got a quote to sub-meter and requesting a $10,000 credit at closing so I can get that done when I purchase. Billing back water to tenants will bring expenses to 37%
At 240K looks like a 10.6% CAP rate and being as full as it is not bad. So long as infrastructure is okay and the homes have been fairly well maintained by the tenants it sounds pretty turnkey. Market sounds okay on the surface, let the test ad confirm.
I would look into state programs for passing along the septic maintenance costs. Your Public Utility Commission or equivalent may have a program to allow for billing blended costs on a monthly basis. You would need to operate the Park for a year so you can show what these look like when you file with your PUC, and they would approve such charges - that’s how it works in TX anyway. Is there city sewer at the street yet?
Also re-bid the dumpster if the contract has been in place with the Seller for more than 12 months.
Sewer has been brought to the next lot, but wasn’t extended to the park. That was something I was going to investigate further if I got it under contract.
The current owner has it in the lease that the tenants are responsible for the septic maintenance. That doesn’t sound like a good idea because when it goes bad, the owner is going to have to foot the bill. I was going to take this over, look to bill back water and raise rents down the road.
Currently, the owner takes the trash to the dump himself. So I don’t have any issues getting bids for this.
The homes are all from the 80-90s. Average tenancy in the park is 11 years, with some as long as 36 years, some as recent as this year. The most recent ones are paying a higher rent than the older ones. I’ll be bringing everyone up to market rents.