I have a park in Tennessee with 105 lots with septic, city water and power access. The park was a dump and has been cleaned up and getting compliments from
everyone on its new appearance even though it still needs more work. Sewer in plot per city planning. Of the 105 lots there are about 10 double wide lots available. Currently there are 27 homes on site, of that 13 are new homes I have installed this past year. New clayton 66x16 homes - 1 is a new clayton double wide. All 27 occupied. Lot rent is $190 = $30 water = 220 total lot rent. Park responsible for water bill.Existing homes: 2 are newer homes, 5 have been resided and updated, 7 are older homes that look ok. We have rerun power lines to accommodate new requirements for not running power over homes. There is also a large 8 acre open area for future development, and the park is grandfathered to have 155 homes, but not sure if you would get quite that many in there. Questions: How do you price this park for sale? Is there a price for pads only, than a price for future development potential, and a price for existing homes? The potential is so big but I’m not comfortable with getting in more debt to finish the project.
The value is the income minus expenses. I assume ALL the homes are rentals and if so your demand for lots is negative and thus your infill is basically WHAT YOU bring in a costly situation if rentals are priced low in the area. It really does not matter at this point if you had 30 spaces or 300 the value is the present NET INCOME. I just looked at a park yesterday priced at $275000 with 60 sites with ALL city utilities and metered by the city developed in 1998. The area is full of section 8 housing and the average rent is probably $425 per month. The park had 8 spaced full and with 40 years of experience if it was free I would not touch it. WHY? the demographics for higher rent is negative and the present and future demand for spaces is POOR. It is very important when BUYING that a low price for a property is not always a bargain–when a present owner is doing poorly how does your experience change the situation. Hope and change in the world of trailer parks just will not fix broken.
This park has a big challenge, which I’m sure you already know, in that you are 53 additional lots filled from being at stabilization rate (80% occupancy). Until you hit an occupancy of 70% to 80%, it will be very hard to find any commercial lending for this park.The current value of the park is 27 x $190 x 12 x .7 x 10 = $430,000. But that’s predicated on finding a buyer (and lender) interested in a park at less than 30% occupancy. Then you also add the value of the homes (but buyers hate having as much home value as you’re going to have – I’m assuming you need over $400,000 to pay back your home investment alone).There is no easy answer to this situation. How much do you need for the park in order to come out of the deal whole?
Chief, please go over your last statement carefully and then three more times: that is a problem any NEW buyer would be very caution about. New park owners, please it is normally EASIER to buy and pay for a property that is at least 80% full with non-rentals from the management level and from the loaners position. Leave the 50% vacant properties to the experience buyers that have DEEP POCKETS AND CAN WAIT FOR A POSITIVE CASH FLOW. Personally with over 40 years of getting my hands dirty I always bought parks at least 95% full. WHY??? I owned one park that experienced some unusually flood damage and lost 50% of the homes; but since it was in a Very HIGH DEMAND AREA (Branson, MO) we had it full again in 18 months with no homes brought in by the owner (30 homes brought in by tenants). When it was full I SOLD THE PROPERTY and never even think about owning a park in a flood plain or partially. I suspect with the new homes and the normal repayments on them your net is less than $30,000 this year–I hope I am wrong!!!
As Frank will attest too; finding quality parks (75 spaces or more) with excellent present and future returns are becoming much more difficult to find and I would like to own two more quality parks at this time to help in my tax situations with the excellent returns we receive from our present parks.