Fund deck says lot rent goes $290 to $425 in year two. What am I missing?

@vellum it's common and it's the assumption most people skip past. Ledger, ask them for the model with the exit cap set equal to the going-in cap and see what the returns look like. If the deal only works with cap compression, they've told you what they're really selling. Good sponsors will send that sensitivity without complaining, because they've already run it.

Number 4 is the one I'd have missed entirely and now can't stop thinking about. Moving and setting a used home isn't cheap and getting new ones delivered means dealing with a dealer, a transport permit, and a setup crew who are all busy. 38 homes is a program with staff, not a line item. Who's doing it, and does the fund pay for the homes or does a resident?

34% expenses on 480 lots they don't own yet is a pro forma, not a number. Ask for the T12 on each of the six, actual, and build your own ratio. I'd bet the in-place ratio is in the forties and their 34 assumes water gets billed back to residents and the seller's deferred maintenance stays deferred.

Floating debt with a 24-month cap on a five-year hold is the part I'd write down. The cap expires halfway through the business plan, and if the rate is above the strike at that point they're either buying another cap at whatever it costs then or refinancing into whatever the market is. Ask what the plan is for month 25 and ask it in writing. Also ask whether the loan has a DSCR covenant and what the in-place coverage is at close, because a rent plan that slips can trip a covenant long before it hurts distributions.

Rent increases are the item that gets the sponsor in the paper, but the thing that actually eats the plan is the same as always. Somebody walks the park in month three and finds the roads, the pipe, and the trees that nobody priced. Ask what capex per lot they've budgeted at each of the six and compare it to the age of the infrastructure. If the answer is a round number like $500 a lot, they haven't walked it.

The 46% jump also has a practical problem before it has a political one. People at $290 in the lowest-cost housing in town have a payment capacity, and going to $425 means some of them can't. They can't easily move the home either, so what you get is delinquency and abandonment rather than clean turnover, and abandoned homes on your lots cost you money and time under whatever process the state requires.

You're overweighting #1 and underweighting #2 and #4, and #3 is the one that decides the outcome.

On #1: getting from $290 to market on a park bought below market is the whole thesis in this asset class, and it happens all the time. What almost never happens is 46% in 24 months in a straight line. Notice requirements for lot rent increases are set by state statute and sometimes by local ordinance, and a handful of jurisdictions have rent stabilization that applies specifically to manufactured housing communities, so the answer differs by park and a local attorney should confirm each one. Practically, most operators I know do it in steps over three to four years, and every step you push out delays the NOI that the exit price is built on. So ask for the model with the rent plan stretched to 42 months. That single change usually does more damage to the returns than any of your other three concerns.

On #2: 34% is aggressive for parks with 88% occupancy and deferred capex. Ratios in the mid-thirties tend to belong to stabilized parks where residents are billed for water and sewer and the owner has already done the underground work. Ask which of the six currently bills back utilities and what the ratio is before that assumption.

On #4: 38 infill homes at whatever a new singlewide plus transport and setup costs in those markets is a seven-figure capital program, and the deck's loan to cost either includes it or it doesn't. Find out which.

On #3: @meridian is right that you want the flat-cap sensitivity. Combine it with the stretched rent plan and you're looking at the realistic version of the deal.

Whether any of that is acceptable to you is a securities decision and yours alone, and worth running past your own advisor.

Ask who manages them. Six parks in three states at 480 lots means either regional managers or a lot of driving, and the payroll for that shows up in the same expense ratio they've put at 34%. Third-party management in this asset class is thin outside the bigger metros, so if they're self-managing, ask how many parks the current team already runs and how that went.

@keystone's point about the steps is the one I'd hold onto. Every year of delay is a year of the pref accruing while the rent isn't there to pay it, and that gets made up out of the back end. @ledger did the deck say the pref is cumulative?