What’s at issue here is the theory versus the reality. I’m not telling you not to do the deal, if that’s what you want to do. But be real carefull, and allow plenty of room for error, because adding lots is much more expensive – and often less profitable – than it looks. Obviously, if you can add 40 lots and rent 30 at $300 per month, then that’s great. But what about the 30 home notes totalling $450,000 to $600,000 that you took on to fill those lots? No investor buying your park is going to give you $450,000 to $600,000 cash for those notes. Some will give you -0- and tell you to keep them, others will give you a discounted value of maybe 50% of face. Either way, they’ve killed your profitability. The only way you can achieve a success story on those extra lots is to 1) sell the homes for cash to the end users or 2) hold the home notes until they are paid in full and then sell the park.
I’m the first one to tell you to always “think outside the box” on this stuff. I just want you to be aware of what’s out there to worry about.