I have a park under contract and the roads are in brutal shape, with alligation (spelling?) and pot holes.
The seal coating company said that the roads are shot and they can’t really seal coat. The seller is saying they don’t affect the NOI of the park.
I disagree with the seller. They are an asset with a lifespan, just like a roof on a home. While a roof on a home creates some additional issues, a road still needs to be kept up. I should get the price reduced to replace roads where needed. If you can’t seal coat, I feel that repairs and maintenance will just keep going up as more pot holes will keep forming.
On a small park and with a local bank, what do they usually say about roads? I have had a discussion with lender, but I want to get an additional perspective.
At what point do you say “we need to replace these roads.”?
Ask to see any capital improvements over $500 for the last 3 years. Possible lots of unseen deferred maintenance! Any one paving over blacktop please place at 3 inches of base over the old asphalt so the new will not image the old road imperfections. Roads in good condition are very important–the best possible tenants will live elsewhere if in poor condition!
Generally speaking the local banks that I shopped with didn’t care that my roads were gravel. However, the few national mobile home lenders and brokers who I spoke with seemed to be preoccupied with this. In the end I went with a local bank with a very competitive rate.
I could understand the sellers argument and sellers are always going to argue what benefits them. However, as a buyer I would make sure you have good roads because at some point, and usually sooner than later, you will have to fork out big money to pay for the roads. Either discount the price for the roads if they are as bad as you state or just walk away.
Road repair is a huge expense, perhaps the very biggest you will encounter unless you have private utilities that need major repair. You have to redo them when your demographic would rather live down the street than drive in your park. It’s always hard to tell when something intangible like “reputation” or “curb appeal” is getting bad enough to make the investment worthwhile, but if you are asking yourself that question it’s probably time to suck it up and make the investment in improvements.
+1 on “asset with a lifespan.” This does not get enough attention in discussions on this forum.
I agree, i was going through some old posts where you had mentioned the 3% of purchase price and rebuilding the park . these numbers can be very large if you aren’t keeping tabs on them regularly. I think this is very easy to overlook as a new investor but the 100k check is real when you go to do some of these things and need to be figured as part of the initial capx cleanup or putting them on a plan for progressive updating if that is a possibility.
Local banks usually don’t seem to care. Either they fund the project or they don’t. If your roads get bad enough, you will get complaints from not only tenants, but also from the state inspectors and insurance companies. Cracked roads are a trip and fall hazard.