I am currently chatting with a park owner who runs a seasonal MHP in Wisconsin. Park is full with all TOHs. The downside is that the residents currently only pay for 5 months out of the year when the park is open. First question - is this typical for a seasonal park to charge only for a portion of the year (when the park is open)? Also, curious to hear thoughts on if this park should be valued the same way as a traditional MHP? Lastly, any pros or cons of a seasonal park that I should be thinking about when talking to the owner?
I evaluated a similar type of park last year. The park was open May to November . The lot rent for the year was due no later than April. The lot rent was $280 per month and the tenants were required to pay the yearly amount, $280x12, by April. I valued the park just like a traditional park. It was a nice park and well taken care of - it was a weekend getaway type of place and the owners had a lot of pride of ownership… probably because the trailers were vacation homes and they had more discretionary income than a typical park resident. The pros to me were: no risk of evictions for half a year, quiet park during the week, easy to manage for much of the year, if not all of the year, tenants have a good amount of discretionary income, park had high demand (vacation destination on a lake). The cons were that there’s always a risk that a tenant (or multiple tenants) wouldn’t be able to afford to pay if they lost their income and I’d get stuck with the home for a time period until I could sell the home. Another concern I had was getting financing. I wasn’t sure if a lender would be willing to loan on an asset with seasonal income.
My deal didn’t work out because the owners (the children of the people who built the park) decided that they didn’t want to sell yet. If the deal went through, I would have closed at the end of 2019 or early 2020, just before the pandemic. Looking back, I would have been VERY concerned that I wouldn’t get my lot rent due to Covid.
@tmperrault very good insight here! That makes a lot of sense about folks in this type of park having more discretionary income. That’s definitely a positive.
I also found it interesting that the park you mention required a full year of rent before the park opened. The park I am looking at only charges for the months it is open, but perhaps they make up for this in the total $ amount charged. Still working to figure this out.
And regarding your concerns about not receiving rent during the pandemic, the owner I am talking to did in fact confirm that they were forced to delay opening because of state ordinance, so your concern is well founded. All of his residents came flooding in as soon as the order was lifted, but I am sure it was not a comfortable position for him to be in at the time. Thanks again for the feedback
75% of our parks are seasonal RV and MH parks with full year income with mild weather (little or no snow) with most 2nd homes. Pandemic made no difference in our OK. park but surrounding states were shut down but kept our Fl. parks open as per club house etc. Out of our 12 parks only ONE was a family park with NO park owned homes or RV’s.
@carl thank you for this info! Just to clarify one point, it is typical for a seasonal park to charge rent year round in your experience?
Varies as per operator–if a unit is on a site normally we charge a reduced rate for uninhabited rigs. Fl. has a lot of 6+6 and presently Canadians that are snowbirds cannot cross into the States but will charge them the normal rate as if there was occupancy for 6 months. Where parks are seasonally used but used as second homes normally pay a one time yearly fee or by the month. We have been very happy dealing with seasonal MHP’s and RV parks for the past 35 years—again parks with no POH’s and late payments.