Reducing the number of empty lots in a park

We are looking at a park where the numbers are excellent at its current occupancy. The big turnoff is that it has 50 vacant lots out of 100. Its an REO deal and the lender who took it back is willing to offer financing to us but we know our exit strategy would be tough unless this lender allows us to assume the loan to a future buyer. The park was completely mis-managed for years and the previous owner did nothing but collect rents once a month. When the lender took it back they tore down 25 homes and spent a ton of money trimming trees and repairing roads. Other parks in the city have high occupancy.

We do not have any intentions of bringing in 30 homes to get it to 80% occupancy (probably plan on bringing in 10-15 homes max) so I was wondering if anyhone has ever removed empty lots so that you could bring up occupancy. What would be required to do that? would you have to tear out the pad and cap off the utilities and then contact the city in regards to changing the permit? We were also thinking of giving empty lots that are next to occupied homes and letting them take care of the upkeep.

Let me know your thoughts and if anyone uses this strategy to reduce empty lots.


In most markets, if your space rent is say over 200 / month, your better off buying an older home, mid - late 80s or early 90s, setting it up and selling it for your hard costs. You can probably move the home in and set it up for 7-9k, and the lot is probably worth twice that. I like to think we can fill a lot, give the home away and still double our money on the CAP value of the home being occupied.

I would crunch the numbers and see if pulling in homes might really give you a huge bump in value. Find a deep pocket partner to help finance the homes and look at the park as a three - four year project and flip. We are selling our homes on 24 - 36 month lease options, so you would be out of most of the homes if you really planned to pull them in fast, get them sold for cost and make your money on the decreased expense ratio and the new gross income.

Also how big are the lots? If the lots are smaller you might be able to move in bigger homes and knock out two lots with each house.

So combining lots is a move you might make if you need larger lots to fit newer homes. Many old parks have lots too short and not side enough to take the modern builds. Remember your real value is in occupied lots, so every time you remove one, you loose the opportunity to fill that space and capitalize the income.

quick math-

if a space was rented for 100 / month- and expenses were 40% of gross…

each 100 of gross is worth $720 of net

Divide your net by the cap like this- 720 divided by .09 for a 9 cap


9 - $8000

10 - $7200

11 - $6545

12 - $6000

So you can use these numbers to figure value of lots based on gross pad rents…

if the park rent was 200 / month- double the numbers to find the rough value of a occupied lot…

300 / month- x3


So if you combine lots you might be able to fill the spaces, but you also give up value…

This is a huge item to look at in due diligence. Lot sizes, and then you MUST go to the city, county state etc and know your setbacks and any zoning laws that might affect the park. Some older parks will not let you increase the ‘footprint’ of what ever is there now. If your dealing with a park that has a bunch of 10 or 12 wides, that are 40 or 50 foot long, you might have a real issue if you need to replace houses.

I am not saying these deals are all bad, but you need to factor in this risk when your looking at your buy side CAP rate.

You are way better off knowing what not to buy… most people want to know what to buy.