New investor, thought process comparing 2 parks

[Derek Williams]

Hi Community,

I'm a new investor here looking to get into my first park. I've been sniffing around for a couple months and think I've found a couple interesting ones I'm trying to decide between. Neither is a home-run, but at my budget I don't think I'm going to find the perfect park. Any input you seasoned pros can provide would be very helpful. I appreciate being able to learn about your thought process that goes into selecting an investment. 

Requirements:

Max Out-of-pocket: $85K
Primarily looking for seller financed deals since any of these smaller parks seem to require around 60% LTV to get into with bank financing.

Primary goal: Income now, with a decent exit strategy in a few years

City water and sewer

On-site manager and stable park so I don't have to put in time I don't have doing a turnaround project.

Park 1:

Sale price $450K. Rural Northern Michigan town of less than 3000 people. Closest city is over 50 miles away and it is small with just barely over 20000 people. So obviously it's a small community, but kind of a vacation town with pretty steady population that mostly supports tourist business. In other words, it's very small, but I don't think it's in danger of disappearing. Median home price $95K, but about 25% home vacancies. Rental market is not strong with rents about 30% below national average. Park has 37 lots. 7 are vacant. 13 are lot renters, 17 are POH, and those are all filled. POH are less than 20 years old and in decent shape. Park is pretty nicely maintained overall and much more visually attractive than park 2. Lot rents $215. Upside is limited - trying to fill vacant lots and I think their current insurance costs about double what it needs to. Current expense ratio about 40%. Current NOI including POH rents is ~$75K.

Park 2:

Sale price $350K. About 25 miles from Chicago in an area that has seen a pretty drastic population decrease of about 20% in the last decade but the city population is still over 80K. Lots of abandoned homes (over 25%), urban blight, and median home price of only $59K but the rental market remains pretty strong. Rental vacancies are less than 1% and rental rates are very near the national average. Park is full and historically remains full with 19 lots - 8 POH and 11 lot renters. POH are not in great shape and generally the park is not visually attractive compared to park 1. But with the surrounding area in the shape it is, it may not really matter. Immediate upside is that I can add water meters and drop expense ratio from 52% to 32%. Lot rents $285. NOI including POH rents ~$50K once water is submetered.

Park 1 seems to me the better option with immediate dollar numbers, but the remoteness and small size scare me. What are your thoughts?