New RV/MH Park Deal: Seeking Feedback!
Newbie to the forum posting but have been lurking around for awhile. Anyway, I recently sold a home and have cash available for real estate opportunities. I live in a small town (4,000) with a huge federal employer anchoring the very rural community. There is a housing shortage with MANY workers (both full time and contracted) opting to live here for the week but not move to town. As such, many live in their RV. The RV parks around that rent by the month are completely full. I have an opportunity to purchase a distressed parcel with 8 RV/mobile home lots on it. The park is currently empty, has water/sewer/power on it which will need some repairs, and will need to be cleaned up in general. The city has granted flexibility in either renting the lots to RVs on a monthly basis or placing MHs on the lots for a more permanent usage.
I'm looking to purchase the property (25,000SF) for $62,000 and plan to invest up to $8,000 to improve the utilities and grounds. Here are my projected financials:
- Rent each stall at $250/mo providing water/sewer/garbage.
- At 50% Occupancy: Gross rent $1,000/mo, net $552, cap rate of 9.5%
- At 75% Occupancy: Gross rent $1,500/mo, net $958, cap rate of 16.4%
- At full Occupancy: Gross rent of $2,000/mo, net $1413, cap rate of 24%
For a $70,000 investment, $11,000-$17,000 per year is sounding pretty nice. I like the thought of only being responsible for the utilities. I would strive to rent to government workers and contractors, doing so by promoting the park as a quiet, clean, comfortable setting in a residential neighborhood versus the other parks that are along the highway in commercial districts. Current estimates are that there will be extensive work going on at this government facility for 15-20 years. I have the flexibility to slowly place MHs on the lots as cash is available and assuming they pencil out to be more profitable. If nothing else, the land is probably worth about $65,000 alone.
Any major concerns here? Am I missing anything? Anything to be aware of when renting to this demographic? On monthly rentals, is it reasonable to require tenants to pay their own power/internet/tv? Other parks offer ALL possible utilities but charge $340+ for them. My approach would be if you want it, you can take responsibility for it!
Thanks all!