This park listing just pushed me over the ledge. I am very lucky and thankful to have purchased a park in 2016 before this madness. But the plan was always to own multiple parks so like many of you I get frequent broker emails about parks for sale. I do not even bother to open half of them anymore and what I see has had me on the sidelines for quite some time now. I cant imagine being a first time buyer trying to enter the market right now.
My park is located in Minnesota so when I saw an email for a new listing located on the outskirts of a suburb of Minneapolis I was definitely interested and decided to check it out. Let me first just say at least this listing was priced and didn’t just say offers due on this date. Every other listing I see the brokers want a notarized LOI hand delivered on horseback detailing why their suggested price guidance is absurdly low, which family member is head of a regional bank, how much they have pre-funded your account for an unknown purchase, what days you are available to wash their car, and a picture of your wife.
But like I said this park was priced which was nice. They are asking nearly $6 million for 62 lots @ $565 per month. First I google street viewed the park. Right off the bat this park is at the entrance of a landfill and scrap yard. Of the 62 homes in the park only 1 home looks to be a 1990’s or newer home, the other 61 all look to be older 70’s homes and not in good shape. The roads are in poor condition with potholes, standing water, and full of old uneven patches. Parking looks to be a big issue, and lots are on the smaller side. The park is serviced by private well water and aeration sewer. It is not an attractive park and it looks like there is some heavy lifting to do getting the homes and lots to be maintained properly. Finally, I think the $565 lot rent is fairly valued and I do not believe there is some huge increase ripe for the picking.
I did not bother to sign NDA’s and open the financials at this point but some quick math shows 62 lots x $565 x 12 = $420,360 gross income. Now I am sure the seller and broker claim a 15% expense ratio with obvious omissions of common expenses but using a more real world expense ratio of 40% that puts net income at $252,216. Making this park about a 4.3 Cap.
The previous broker listing I looked at a week earlier was a very nice 68 lot park in Florida located in my hometown which is coastal but middle class and small. Price guidance was $10 Million and after looking at the financials the park was netting something like $200,000 or less if I remember correctly.
Who is buying these parks at these prices? Am I looking at this wrong? Anyone else just deleting broker emails before even opening them?