Value Add Park- Deal or No Deal?

[Matt P.]

An off market mobile home park acquisition opportunity was discovered in our area through cold calling. The home is in a rural setting about 20 minutes away from a mid-sized MSA in North Carolina. A little bit of information on the deal:

52 owner occupied lots renting at $190/month. 28 vacant lots. No park owned mobile homes. Market average for lot rent is around $250/month. Comparably sized market rate apartments in the area run at $600+ per month. 

The park is on city water but has septic tanks for sewer. Park pays all utilities currently, but it would cost around $25K to have all lots metered. 

Total NOI currently is $86K. We negotiated purchase at a 10% capitalization rate but have a very long lead time (18 months) during which we could fill the vacant lots prior to closing. No seller carry available on this one. Demand for homes in the area is high based off of phantom ad posts, but we have no experience in buying and selling mobile homes.

My questions:

1) Does the acquisition make sense at the current cash flow?

2) What is the best way to increase the occupancy of the park? Buy new homes at wholesale and sell them on the vacant lots? Purchase used homes in surrounding parks and move them to the property for sale? 

3) There are an additional 10 acres of virgin land at the back of the park that are permitted for pads. In the current municipal market, I don't think that we can use the land to accommodate more trailers. Any suggestions for what we could do with this? Is it worth valuing at all? 

Thanks for any advice that you can offer in advance! Info on more deals to come.