I had been looking into buying a small trailer park recently.
We drove out to it, and took a look around. Initially it looked like a great deal, even though it seemed to need a lot of work.
On initially looking over the property, All of the trailers were owned by the current owner and were part of the deal. There was also a house included on the lot, based on what the initial costs were, the listing price was close to what I would think the house was worth. The house from the outside, looked like it was in OK shape only needing some minor work done to it. The trailers only had a few tenants, all of which looked like maintenance had been neglected. Most of the trailers looked like they needed some rehab work, though a few looked like they needed to be removed. In all, the initial look still looked like there was a lot of opportunity!
Everything looked good so I asked a Realtor for a bit more information on the property. I had also looked up the property tax on the property to verify it was around what I had been expecting. He followed up with the income / expense statement for the property, and the rent roll. In looking them over, because of the current high vacancy rate, I had expected to see it operating at a loss, but didn’t expect to see expenses anywhere near as high as they were. I started asking some questions about the higher than expected expenses. I had expected it to have negative income at first, but the plan in mind was that I would do mix of selling off some of the trailers to others who would rehab them, and would rehab some myself, in the end making the property profitable again. The answer to my questions came back and I found that there were justifications for most of the expenses. Though I thought many were a little inflated, one reoccurring one relating to the well on the property stuck out. I spent some time researching the requirements around it, and what the monthly costs should be, and in the end, though I think I can get the testing done for less, it still places a big enough expense that the property no longer made sense to purchase. Minus this one item, and the property would have been a great deal.