Your opinions on Multi-Park deal

Pocket Listing
Multiple Parks
107 pads, 89 occupied, acreage to expand
All located in a 20 minute circle of each other
New York
Asking $3M
20 Rent to Own units $250k in notes remaining
490k Gross Potential Rent
17% vacancy
Assume 45-50% expenses plus debt service

What are your thoughts? Am I missing something? Is it a good price or is it over priced like I think it is?

Does anyone have any thoughts? I’m thinking about putting in an offer next week and I your guidance would be much appreciated!

What are actualls? Lot rents?
I’d make an offer based on actuals, not potential. Potential is something you have to work for and shouldn’t have to pay the seller.

Property Taxes (per/yr) $34,636
Insurance (per/yr) $5,998
Utilities - includes septic,elec, fees (per/yr) $42,186
Advertising (per/yr) $1,000
Property Management Rate 7%
Repair and Maintenance 10%
Legal $2,000

89x395x12x50%=$210,930 @ 10 CAP = $2.1M

The $250k notes need to be valued separately. If performing and you think each home is worth avg $12,500, I’d probably offer 90% of that or $225k

Total offer $2.325M
That’s my guess. Depending on the CAP rate there, the number would probably be higher.

9 CAP is $2.6M
8 CAP is $2.88M
7 CAP is $3.26M

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Your original post said to assume 45-50% expense ratio. Also, smaller parks tend to have higher expense ratios because fixed costs (legal, accounting advice, etc) are divided into a smaller gross. That said, 100 lots is not small but it’s a conglomeration of small parks so…run your own expense numbers after the first ROUGH estimation of value by formula.

During DD, prove to yourself that the gross is collectable and you can replace bad tenants if they don’t pay. The expense side can be estimated but there will always be unknowns that you didn’t anticipate. Leave yourself some room to absorb these shocks.


I ran my numbers and have these parks pegged around 35% operating expenses, is that actually doable?

I assumed:
15% vacancy
$6k Insurance
$35k Taxes
$42K Utilities (water, trash, park lights, etc.)
$1k Advertising
7% Property Management
10% R&M
$1k Legal

We haven’t heard if this is a collection of eight Parks or two Parks. If it’s a couple 50 pad Parks then yes 35% is reasonable. If you have some 10 or 20 pad parks in there you need to tick up your blended rate to reflect the higher ratios those would have.

This is two 50 pad parks

Are these numbers coming from the seller’s tax return? $42k seems very low if both parks pay for water. Not to mention, trash and street lights are also included in that number. Your numbers also don’t include reserves. They have septic so you really need to put away a good amount of money each year to account for some of your future expenses. Reserves alone would probably be $10,000-$20,000 per year combined for both properties.

Giving 90% on the notes is plain foolish too. I currently hold paper on two single family homes and I made certain the notes were perfectly structured, with very well qualified buyers, and they both perform on time and are seasoned. The max offer I’ve ever gotten for those two notes is 80%. I wouldn’t offer more than 50%-60% on a mobile home note that has a depreciating asset attached to it and is likely sub-prime with poor payment history.

Thank you Charles, that is VERY valuable feed back on this and any future deals. We are making the jump from apartment buildings to MHPs so every comment helps.

One of the properties has city water, sewer, roads, etc.

Interesting comment about the reserves. Typically what amount do you like to have to have what you consider a fully funded reserve account. Typically on our apartment complex purchases we tend to fully fund the reserve at purchase to avoid any underfunding for event that might happen year 1

We fund our reserve account with between 2%-4% of the purchase price. If we are going to do anything up-front, we also fund that immediately (like repaving a section of road, doing a large improvement to a private utility, etc.)

Where the reserves come into play are for things that do not immediately impact our cash flow. For example, we have a park where we have owner financing in place for 10 years. Sometime in year 8, we’re probably going to resurface the road to help with the refinance. My preference would be to save for this out of cash flow for the next 8 years instead of inefficiency sacking all of that capital away at once or expecting all of us to cough up the money in year 8. Therefore, we increase our reserve account by about 2% of our gross revenue each month. Our savings will increase as we push revenue and hopefully keep up with the price to do the job 8 years from now. When that time comes, it shouldn’t interrupt our cash flow. The same should be done for septic. If you expect a large problem to occur every so many years, the money should be saved to deal with it. You can dip into your initial reserves for a lot of this, but you’ll still have to replenish those after dealing with the problem. We choose to save every month and hopefully never have to dip into the reserves we started with or interrupt our cash flow each month.