I am a first time poster and potential investor - I really appreciate all of the great advice that is shared in this forum.Is there a rule of thumb for the minimum size of a park to have an on site manager? I am looking at parks that are too far from where I live to manage myself - what is the general consensus on what is too small to be a remote owner?Thanks,Joe
In general, the smallest park we can make work out of state, or my area, is at least 35 spaces.
Jim, is that due to 35 spaces not providing enough income to make the remote management situation worthwhile?
Yes. That is our break point. If I had a park in an area, and was looking at a second park in the same area, I might fudge that number to 30 spaces and look at them as splitting the out of state operations costs. But in general, it takes us 35 spaces to make the number worth the time. The general numbers might work for stand alone smaller parks, but if you make a surprise trip for some sort of issue it eats away from your NET in a hurry.Think of it this way- if you have sewer issue and it costs $1,000 to fix, that cost is spread between all your lots. In any given month on a 35 space park, that might eat 30% or better of your NET after you have paid your loan. Well small parks with sewer issues cost the same. On a 20 space park that same issue might eat 50% or better of your net. Add in a flight, hotel and rental car- and the small park might be in the red that month. The more lots your spreading your issues across- the more months you will have in the black. I hope that helps!
If the parks are near you, then there really is no minimum size - especially if you need to start small. I’d be more concerned about the infrastructure. You can always learn the business with a small park, improve it, and then 1031 up into a larger property.My 2 cents worth,-jl-
The minimum size park to buy is not based on manager compensation, but based on exit strategy. The largest number of banks that will finance a park start at $500,000 and up in loan size. That means a deal size of about $700,000. At that size, you can use a mortgage broker like Security Mortgage Group, which is what we rely on to get the job done fast and easy. We tend to top out in park value at $20,000 to $30,000 per lot when we sell (this excludes areas with high rent). So that means the park size that leads to hitting the magic number is around 25 lots to 35 lots (depending on lot rent and value). So if you want to have the largest group of buyers and bankers possible to get you a good price in cash, you should probably start in that size range.