We’ve started due diligence on a 140 lot park located about 70 miles outside of Chicago. The initial market looked OK - i.e. 2BR rents in the area for $750 and average SFH $80,000, with average SFH for the county even higher at $120,000. However, as we have begun speaking with realtors and checking out SFHs on the market currently we are finding that there are many $50,000 (and even several $40,000) decent-looking SFHs currently on the market.
Lot rents for this park currently sit at $250 (tenants pay utilities) - and the park is about 85% full. We were planning on raising rents about $30 (based on parks in nearby towns) but now I’m questioning that assumption. Logically, I’m having a hard time moving forward on this park when I know potential tenants can get a decent single family home for about the same monthly payment.
On the other hand, our test ads have been strong - getting about 30 responses per week advertising for sale or rent-to-own for $600, including lot rent.
Can anyone help me interpret the above data points. Should I drop this park, or am I overreacting to the low SFH options in town?