I know that Frank and Dave talk against investing in rural areas, but is always bad to do so? For instance, what if the park has had for many years a 90% plus occupancy level, and all occupied homes are tenant owned. The owner has owned it for over 30 years and owns it free and clear, and he is retiring to florida so he wants to sell and he is willing to hold paper for 15 years at 4% amortized over 30 years. Park is 54 space and is currently 93% occupied city water and city sewer, with an expense ratio of 20%. This is the general outline of the deal without getting too specific,does this sound like it could be a viable deal or should I ignore it.
It does sound very viable. I think you still need to do some due diligence on the larger metro area and check to make sure that this rural area is not reliant on a single employer and that there are no major issues with the Park. The seller financing makes it very attractive. How much down are they asking for?
Best â€“ Tim King
If you like the numbers and general parameters of the park, then get it under contract quickly. After that, you can really dig in and conduct due diligence to see if its a market you feel comfortable with. We recently bought a park in a rural market - the city is a whopping 1,000 population. However, its within 25 miles of a few larger markets and strong economies. Each have Walmart, Lowes, all the big box stores. This rural market also sees a lot of tourism through the spring and summer months. The park itself had 44 out of 48 occupied - all resident owned homes. Very well established tenant base. So we felt very good about the purchase.
I think you absolutely need to run a test ad and make sure there is strong demand in that market. And get to know everything you can about the area. Make sure its not a one-horse town.
Thanks for your response Tim, the owner is asking $225K as a downpayment, also has two larger ares one 30 min north with about twice the population and another area about 30 min south with about three times the population the job markets in both the North and South areas is ok. Also the park in question is a senior community, and since it is does it make for a better investment?
He’s 100% correct. Additionally, on the senior niche, be careful. It is much harder to find tenants for senior parks than all-age communities. We prefer all age over senior, as we want the phone to ring a lot. If it is senior, then make sure your test ad says “seniors only” prominently in the ad, so that people know the limitation. Also, make sure that the park really has that designation. It does not really exist for many parks – it was faked by the mom & pop who just hated kids. Without the official designation from HUD, it’s really an all-age community that is guilty of discrimination and needs to have the “senior” designation lifted immediately upon purchase.
Also do remember, the “belly of the snake” (boomers) are a wide age range - will your residents be dying off? Are they in their 80s? 50s? If they are in their 80s - is the area attractive to younger people who will move in?
We are fairly rural in our 4 parks, but within a couple miles of a Wal Mart Super Center (they do the demographic studies for me)
We did have a VERY rural SC park, dirt roads, 45 min to a Wal Mart, etc - we made money on it - great money. It all comes down to management - and with this forum, you have lots of assistance.
New investor here. I suppose the real question is, “How far from a decent size metro area is considered too rural?” I’m thinking most people are accustomed to at least a 30 minute commute, so a 30 minute drive, or 20-30 miles might be a good radius to use? And, what’s a good size metro area? Maybe population 100,000+? Would appreciate any experienced investors take on rules of thumb for evaluating whether a location is “too rural.” I’m thinking of using such rules of thumb as a way to cull through the listings, not as a hard and fast rule. Each deal worth evaluating would get the full bore due diligence with test ads, info from chamber of commerce, etc. Thanks in advance for any insights…
You don’t set the metro distances – the government does. Put the zip code in www.bestplaces.net and see what they say the metro is. If it says “none” then you have no metro. I live in a town 50 miles south of St. Louis. 40% of the town works in St. Louis. However, we are about 10 to 20 miles farther out than a standard metro, so we are not considered a metro to St. Louis officially. That means that any future buyer or lender will see that the area has no metro on Bestplaces (or any other similar website) and that will scare them off, even if it’s not true.If you really want to plow through the listings quick, call Brandon at (970) 856-4070 about the Investor’s Club, in which he has already applied the 60/70 formula to all the parks on the website, and sorted them into appropriate stacks (only about 25% of listings meet this criteria).
Thanks Frank. I was thinking of the metro area question more from an employment base perspective, but it’s great to hear that it’s also important for helping sell the park. Thanks again.
Frank … Is the list you mention available for review. Also I am still waiting the delivery of the home study course order a couple of weeks ago.
Dean,Which list? And please call Brandon at (970) 856-4070 and find out why you did not receive it – he sends them the same day (except the four days we were at the industry convention in Vegas). And I’ll throw in the Due Diligence Guide at no charge, to make up for him being asleep at the wheel! Just give him a call.
Frank. I certainly appreciate the offer, And would welcome the DD guide. I am anxiously reviewing parks in an effort to join the ranks. The guide as well as the course will be my guide along the way.
Thanks again. .
Of the ten parks owned not one was in the city limits and the nearest town was less than 10,000 people. 15 years age bought a park that was full have added 40 sites since than and now have 136 sites with NO VACANCY AND NO MOBILE HOME RENTALS. We have retires and draw from all over the US since we are on a beautiful lake and are near excellent hospitals We have NO CHILDREN fulltime in our parks and yes a desirable community and location are important but how you operate is most important. I have had family parks but their tight budgets removed me from that rat race. Right now our residents are enjoying the beach and their boats and yes the property is a pleasure to own and operate. We have been in Texas, Mo. and now Ok. I am ready for retirement–the trip has been exceptional!
Just checking in because I was looking at a few rural parks and doing some due diligence on them.
I was wondering - did you pull the trigger? How’s it been working out?
One thing I was wondering - because I saw another offer with similar numbers - about 30 mins out of a metro, high occupancy, seemed well-run.
But I was thinking - if the vacancy dropped - what happens to my cap upon exit?
If the 90% dropped to an 80%, I’d be in danger of negative cashflow (with financing).
Hope all is well.