I’m currently under contract for a park in TX. It has been mismanaged for the last few years with park manager stealing and owner indifferent as he is undergoing divorce. There is little, to no records on deposits and income, besides the last two months. Owner has co-mingled accounts with another park and business to complicate matters. Bank deposits are patchy and tax returns not reflective of income. Any suggestions on verifying stability of the park without bank records and deposits? How will lenders approach this challenge for financing? Any suggestions greatly appreciated as I want to move forward with the deal.
I just went through the same thing and purchased a park that was in foreclosure. Same situation: little to no records. It’s a challenging, but not impossible situation. The easiest, and most effective, step will be to personally go collect the rents. The most important thing is to verify that the income the seller says is being generated by the park is actually there. Beyond that, you can look up tax, get insurance quotes, etc. and essentially assemble your own financial picture moving forward. (Verifiable rent receipts – along with any leases – should go a long way towards addressing a bank’s major concerns.)
The big challenge will be getting a sense of the shape of the park – both what you can see and what you can’t see. I’m guessing there are little to no maintenance records, so you’ll have to spend a couple of extra bucks to have a plumber and electrician and septic tank guy, etc. come out and help you do the due diligence on the park. Again, it’s challenging…but you can compile a pretty good picture of what you’re getting into by being meticulous and going the extra step. Good luck.
It is important to distinguish whether the seller is a poor manager with inadequate records (which you can reconstruct according to your own plan to run the park), or whether the seller is out to defraud you. We have seen situations (fortunately not for our own purchases) where the seller put people into homes and told them it was rent free if they told the prospective purchaser that they were paying rent.
If the seller looks like s/he is trying to defraud the IRS, it is a good assumption that you are a target as well. On the other hand, with inadequate records and poor management you can usually get an excellent deal since the seller has no idea how to improve the park.