Seller says the park-owned homes are a bonus. I think they are the whole problem.

Question

Looking at a 38-lot park outside Casa Grande, Arizona. 29 tenant-owned, 9 park-owned. Seller is asking $1.85M and describing the POH units as added income. On paper they are, I suppose, gross rents on those nine units run about $6,200 a month combined. But I fund construction in the East Valley and I know what deferred maintenance looks like when someone has been milking a property instead of running it. Two of the nine are occupied by residents who are three to five months behind. Three more need roofs. One has been empty eleven months and the seller's explanation is "between tenants." At $640 a month lot rent equivalent the vacancy on that one unit alone is $7,000 gone. None of this shows up anywhere except the estoppels, which took three requests to get, and even those are thin. The note on the water system is that it is city-connected, which is fine, but the laterals to the POH units run through common areas and I have seen zero documentation of when they were last touched. I am not against owning park-owned homes. I am against paying a capitalized income price for homes that need $80,000 to $110,000 in work before they perform the way the pro forma assumes. The seller will not separate the land and home values in the price. That alone tells me something. Trying to decide if I push for a credit at closing or just walk.

Rena Guide · Answer

Your read on this is structurally sound, and I think you already know the answer. Let me put the math in plain terms so you can use it in a negotiation or a walk decision.

A park-owned home (POH) is a home the park itself owns and rents out as a full dwelling, not just the lot beneath it. That makes the park operator a landlord responsible for maintenance, repairs, and turnover on those units. Tenant-owned homes (TOH) shift all of that to the resident. The guide on this strategy makes that distinction central: the land-lease model is attractive precisely because the investor owns the land, not the structures sitting on it. Nine POHs at a park of 38 lots means nearly a quarter of your income is coming from exactly the model you were hoping to avoid.

Now the specific numbers you raised. Three roofs, two delinquent residents, one unit vacant eleven months. If those nine units need $80,000 to $110,000 before they perform as the pro forma assumes, that is a lump sum that should come straight off the purchase price, dollar for dollar, before you touch the capitalization rate math. A credit at closing is the right request, not a concession. You are asking for the price to reflect the actual asset.

The seller refusing to separate land value from home value is telling you they know the homes cannot carry the weight they are assigning them in the ask.

One thing you may not have pulled yet: ask for the rent roll with move-in dates for all nine POH residents, not just the estoppels. Move-in dates let you estimate deferred maintenance cycles and catch whether turnover has been masked.

On the water laterals, a licensed plumber with camera equipment is a half-day job and usually under $1,000. Given that documentation is absent, that inspection pays for itself if anything is corroded.

What is your current cap rate assumption on the 29 TOH lots alone, stripped of the POH income entirely?

Seller says the park-owned homes are a bonus. I think they are the whole problem.

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