One park or two?

We have a small park in Arizona, and two homes in southern California. If I sold them all, I would have about $1.2M total. I wouldn’t mind rolling it all into another park or two, but should I have one, or two?

I like the idea of having just one because I could get a higher-quality park, with hopefully higher-caliber people (yes, I know, there are always exceptions; but on average…), nicer looking, nicer area, etc, etc. However, having all my eggs in that one basket worries me. What if that town gets wiped out by a hurricane and becomes a ghost town? That is, for some reason, the town becomes an undesirable place to live? Instant no income. Having a second park diversifies, which is good, but doubles the management headache, and I’m back to a lower-quality park…times two.

Which is better…having one higher-quality park, or diversifying? And if just one park, how do we protect against loss of income? Is there insurance available to protect against such things?


You might take a look at this discussion from a couple months ago.

I appreciate that, but it doesn’t address the issues I raised. Primarily, benefits of diversifying,such as parks in different states, versus one park of a higher “quality”, with the risk of total loss of income if disaster strikes that one park.


That’s an extremely hard question, as there are at least a million variables at play. If the question is that you can have two parks with the same values and exit strategies versus one, then I’d obviously rather have two for diversity (same as a stock portfolio). But if the question is one park that is institutional grade with a solid loan and terrific numbers versus two smaller, lousy ones with slim chances of a good exit, then I’d rather have the big park.

As far as diversifying over several states, I don’t think that’s a big issue. Unless you are in a really crummy state, most states have a giant demand for affordable housing, and you’re not going to probably have a sudden shift in which everyone suddenly wakes up rich. However, if your market has only one main employer that closes, then you could get killed. But you should never buy a park that does not have a diversity of employers, so hopefully you would never do that.

Loss of income insurance only pays you until the park re-opens. It is an effective hedge against tornadoes, as the government is good about re-building those towns quickly and pushing people into mobile homes as a solution to the crisis. However, hurricane zones take years to bring back to life, and your loss of income insurance will turn off long before you have any customers again (or the town has employers or buildings again). Case in point, Joplin, Missouri is 85% re-built after the May 2011 tornado (17 months ago) whereas the Gulf Coast is only at a fraction of what it was before Hurricane Katrina almost a decade later.

So my macro response would be to buy one terrific park over two average ones, make sure it’s in a highly diverse employment area with a solid demand for affordable housing that you have proven with a test ad, and make sure it’s not in a hurricane zone, and even then, get with Kurt Kelley at Mobile Insurance and make sure you have all the right insurance strategies.

Thanks Frank. Good thoughts. I would be paying cash in either scenario (1031). I would assume any park I purchase would be a good purchase; I’m exceedingly careful. I was more focusing on the benefits of diversity vs. the extra headaches from a second park. And, what is the “exit strategy” you refer to?


Dave -

My strategy would largely be Frank’s (buy one quality park in a diversified economy), but I’d work hard to improve the value of that park (bill for water, infill a few vacant pads, etc.) and then remortgage the property in 18 - 24 months and with the additional capital, I’d buy a second quality park in another city for diversification.

My 2 cents worth,