Sorry if this post may be long, just want to give you as much detail as possible. My business partner and I have been rehabbing for 4 years and have always talked about getting into buy and hold. We both have condo and hoa management backgrounds, his more extensive and larger than mine. We just purchased the MH course last night.
We have been approached by an investor friend of ours that owns a 55 unit park in Dade City, Florida. There are 16 RV’s (not just slots, but actual RV’s) owned by the park. There are 9 slots that are owned by unit owners that pay a monthly fee and 30 homes owned by the park. The average rent is $500, could possibly be a little more. The average occupancy rate is 90%. The occupancy is down to around 80% right now because the park owner needs to do maintenance on some vacant homes first before renting them out again. The owner says the age of the homes are “old and older.” He says about 3-4 may need replacing.
The park has city water and sewer, no septic. Each unit is sub-metered and the owner reads the meters monthly. He has created a separate “utility company.” Each tenant pays their own water and sewer based on meter readings plus a $10 monthly charge that goes to the owner. Each tenant pays their own separate electric. There is on-site laundry. A company supplies and maintains the machines and the park owner gets about $50 per month from the laundry company.
I believe the park owner has not been doing maintenance and now wants to sell instead of putting money into the park. The county came out and cited many of the homes. (I think some tenants got fed up and called the county). We looked at the citations and most are for things like not having a window screen, not having a crank for the jalousie window, some homes missing smoke alarms, one home had a stove that did not work, lots of little things. We saw nothing major in the reports. Of course these repairs really don’t bother us because we are rehabbers. The park owner estimates about $30K to fix everything.
The park owner showed us his spreadsheet and he averages about $22K in rent and about $15K in expenses. Of course, we are calling in our financial controller to look at all the books and go over all the receipts. But I know the guy well, have known him for many years and know his numbers would be around what he says. He is a straight shooter. He wants to sell the park to buy another one. His asking price is $1.4M.
We are going to visit the park tomorrow and will continue to go over it with a fine tooth comb. But on the surface, how do the numbers look? What else should I be looking at with this park? What questions do I need to ask?
Thanks, in advance, for your guidance.