We purchased a park that had a bad reputation of being run down and lots of drugs. We have spent the past year filling lots, cleaning things up, evicting a few problem tenants. We are considering paving the roads now. The trailers are all very close together and we are trying to spruce up the appearance of the park.
What are your thoughts??
Would it be worth the expense and future maintenance?
What are some improvements that you have done on your parks?
Depends on your market/supply demand. You should listen to one of Franks latest podcasts, he talks about roads and how sometimes it is not needed to pave them, most tenants just care about not having potholes. Each park/market is different.
To the pothole comment, I’d think it would depend on how much traffic and how fast. If the gravel road throws off a lot of dust in the summer, I’d see that as an issue. But if it’s just a slow path to unpacked parking, not sure it would matter.
I’d also adjust to the character of the area. Is it the middle of the city where you want well manicured edges or is it a country escape that’s less formal and rigid?
My grandfather started up in every aspect of the MH business at age 17 and is now 65. I’m 25 and have been working with him since I was about 7. Let me say that first, gravel hides undesired objects better. Second, you aren’t gonna get the cleaver family to move in because you paved the place. 3, the easiest and most effective solution is to scrape the driveway smooth and possibly add gravel to problem spots. And drainage/water routing for the driveway when it rains hard.
The cost of the initial paving isn’t the entire cost of having paved roads.
I put rip-rap and gravel on a 600 foot drive on my last home property. The guy who did the excavation and paving — who sold me the material — told me the best way to extend its life was never to drive more than 15 mph on it.
Figure in the cost of maintaining any improvement. I think making an improvement, and then not maintaining it, is worse than never making it at all.
And to the point one commenter made before me, assess what your tenants want and your market will bear. Super-adequacy isn’t wise.
This isn’t the only way, but you can think of it as a revenue generation asset just like you would a home. For example, if you install two $30,000 homes and get $300 lot rent and $300 home rent, you are generating $14,400 per year on the investment. If you install a road for $60,000, can you raise the rent to generate the same $14,400? Among 50 tenants, that would be a $24 rent increase.
We just did that last year - spent $65,000 to repave and raised the rent to cover the capex. The property is now much nicer and attracts better tenants.
I considered paving but seeing lots and lots of kids in the neighborhood and occasionally in my park on their bikes, I decided to gravel the roads. No more bike riding through my property. Second, some tenants just can’t slow down. Having a paved road invites higher speeds.
Third, unless done well, and depending on the weather, potholes and waves will form where cars slow to a stop.
Another Point to make about the Roads is Financing.
I have seen deals fall apart on due to Gravel Roads and the lack of good financing. Lender A is a prime lender and offers 4% rate with paved roads at 65% LTV. Lender B doesn’t care about the roads at 6% and 50% LTV.
All the lenders I have worked with see gravel roads as a negative.
Agree. I put in gravel over a partially paved, mostly dusty road when I saw the kids on bikes and skateboards in the neighborhood. And yes the tenants zooming in and out. Also the constant Amazon and fed ex and garbage truck traffic would rut and wave the asphalt. So gravel seems to slow their roll, prevents skaters and gets nice and compact as the trucks roll.
I totally get your point about wanting to create a safer environment for kids and avoid speeding. Gravel roads could be a good solution to maintain a controlled pace and prevent speeding issues. Plus, the potential for potholes with paved roads is definitely something to consider.
It’s evident that you’ve taken great proactive steps to improve the park’s reputation by filling lots, addressing tenant issues, and enhancing its overall appearance.
Paving the roads could potentially be a valuable investment, as it not only improves aesthetics but can also attract higher-quality tenants. What really matters though is the appraised value when you go to sell or refinance the park, right? I will say that without a doubt that for us, paving the roads has always been worth it based on the re-appraisal values we’ve received. While there’s an initial expense and ongoing maintenance, the long-term benefits outweigh these costs in my eyes.
Also I would consider WHO you plan to refi the park with post rehab stage… agency lenders (best in class financing terms) may also require paved roads and this gives you more leverage when you go to refi or sell to a buyer who plans to buy with agency debt(they can likely pay more if so).