Any help evaluating this deal would be greatly appreciated!
Price is $280,000. There are supposedly 45 lots but due to their small size the actual usable lots, once combined, total 33, There are 23 occupied (21 owner occupied and two rentals) and 10 vacant lots. Lot rents are $225 with room to move to $250 in 2 raises. Utilities are paid by the tenants with a billback of water and sewer (submetered) and direct billing of the electricity and gas.
There are Orangeburg pipes and one street was replaced so far. Supposedly there are no big back up problems or roto rootering going on. Roads need to be redone, they are a mess. 40 potholes at a minimum with @1/3 of the roadway crumbling (possibly more). I would guess that the park was built in 60’s. This is a city park with a population of 75,596 in the city and $126,880 in the metro. Median home price in the city is $98,064 and $113,900 in the metro. Unemployment in both is 4.5%. A 2 bedroom apt goes for $702 and a 3 bedroom goes for $880. The vacancy rate in the city is 13.4% and in the metro 12.34%.
Based on the numbers, the park sounds like a decent deal. however, when you factor in the road, that could get expensive. Also the organgeburg can be a problem. If everything checks out and the park is in a good area, I would tie it up at that price and then do some more due diligence. Try to get an understanding of how much the roads would cost to fix. Is the owner willing to finance the park, maybe with less down if some money can go to fixing some repairs? Everything else aside, the numbers make sense. Good luck!
The Orangeburg is estimated to cost around between $50,000 and $60,000 and the roads around $75,000. The area is good. I don’t think this park will ever attain a 20 cap because of the Orangeburg and road work.
If you’re comfortable covering the expenses out of pocket, with reserves etc, it sounds like a decent deal. $12k per space plus $8k per space of repairs is not a bad deal. Let’s hypothesize you can get an 8% cap rate after you’re in for $400k. But, you’ll want to refinance once the park has improved and merits a valuation of (say) $400k so that you don’t have all your money tied up.
Only you can determine that. You are in the best position to determine what costs to expect after closing (e.g. deferred maintenance). Cash flow is not the only metric of return, there is also the capital gain. What is the down side, what is the up side? What is the expectation, what is the variance and what are the risks?