What's wrong with this P&L

I am looking to buy a 200 lot park with only 100 occupied lots in the Northeast. Infrastructure is substantially completed for the entire park. The operating partner recently died and the active partners have no interest in bringing in homes. I have a manufacturer willing to inventory finance to fill most of the vacant lots.

Lot rents are $400 and park owner pays water/sewer, and does not bill back to residents. The market rent is around $400 these days.

Below is the P&L. Expenses are very high (66% of rent) - the only unordinary line item is a sewer reservation fee for future lots - which cannot be undone, so long as I plan to occupy the other 100 lots. I am going to try for a re-assessment to get taxes down. The maintenance is high b/c the park has 100 lots paying rent, but the park is 2x that size.

Where are the other opportunities to boost NOI? Any help is appreciated!!!

In my opinion there is nothing “wrong” with the P&L and if you can purchase the park at a reasonable CAP rate on the current NOI, it could be a great deal. I assume that the “market” of $400 per month at the other parks also includes water and sewer. If not, then there is room to move on the rents. The upside potential that I see is:

  1. The water and sewer is $80/month per unit. If this can be sub-metered (and billed with a lot rent decrease), the residents will not be as wasteful and come closer to $50/month.
  2. The RE taxes are high and you can probably push to get re-assessment at 2.5% - 3% of FMV.
  3. If there is good infrastructure, salary for maintenance could be lowered.
  4. If there are no park owned homes, manager’s salary can be lower for a 100 unit occupancy.
  5. The big increase in NOI comes from increasing occupancy, so if you feel there is upside in that area you have long term growth in NOI by bringing in homes (lots of posts on this subject).

In summary, if you can purchase the park at about a 10 CAP on these “terrible” actual numbers (which need to be verified), it is probably a winner.

Good luck and Happy Holidays.


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Howard pretty much covered the big ticket, high priority expenses. I’m curious about some of the smaller expenses too though.

In addition to what he said about water/sewer and market rent, don’t forget about trash either. Is it included in market rent? And what type is it - curbside or dumpsters? Even if the market dictates the park pays, you still may be able to lower it by switching providers (if possible), or switching to dumpsters if you have curbside. What about fuel - is $500/mo worth really necessary? Same can be said for operating supplies. What does that entail, and is it all necessary?

Obviously none of those will have the same financial impact as earlier suggestions. Still, every $1 cut in expenses is an additional $10 in value all the same. Probably even more in the future once you stabilize the park given the size and relatively high lot rent.

Taxes are over 16% of present income–high, and in the NE plan on higher. Why are there so many vacancies, is the demand low and need to try having residents bring in homes instead of using up your cash. The real value of a park is number of paying sites–empty sites look to the future and could be expensive as to time and money. What is the asking price?

Just as Carl alluded to, you need to buy this thing at a price where it makes sense regardless of the other lots. Your obvious big NOI boosters are going to come from reducing the salaries and passing through the water/sewer. On a 100 lot park, you really only need a manager. A fair compensation on a park that size is generally around $25k-$30k/yr. Unless you have a ton of homes, a maintenance man is not required. Just a thought on that, you may consider keeping the maintenance man as the manager if he or she is capable. Having a handy manager can save you a lot of money.

Start looking at how viable it would be to pass the water/sewer through. Above it was pointed out that the tenants are using $80 per month in utilities. I have a park where this is normal because the utility billing just happens to be that high. If I were you, I would start digging into this line item to see what the market tells you you can do with it. If you can’t pass it all the way through, you may be able to pass through everything over “x” amount. This would achieve the same results as far as conservation and make your expense a lot more predictable.

At the end of the day, this thing is worth $1.6 million. If you are in a market where a 9CAP makes sense (I feel 200 spaces in a decent market can be) then you might be able to go to $1.75 million.