Kerman, CA · Member since 2014 · 50 posts · 1 vote
I understand that Lot rent mobile home parks are priced and listed based on NOI. How exactly is that done? Let's say for example, that the NOI of a 100 unit park is $400,000, how is the price/value of this park determined?
@Account Closed From my understand you take the yearly income, minus expenses or up to 40% of income for expenses and then you divide that by the cap rate for the area. I think in the 10-12% from what I have read from others on this topic. So in your case if the NOI is 400K, with a 12% Cap rate your numbers are looking like 400K/.12=$3,333,333.33.
Close, but you didn't account for expenses. Lot rent only multiply NOI by 0.7 (30% expense ratio). Park owned homes use 50% expense ratio. You can see the offer price dropping.
One way to offer on a park with park owned homes is to ignore the home rent. Just calc the NOI based on typical lot rent for the area. Sellers go nutz when you ignore the home rent... Just the way it goes. Park appraisers and banks will do just what I said above. Use area lot rent only to calc the cap rate based selling price.
Also at 100 units your lot rent or home rent is $400/mo. Since you're from CA I can guess this may be a reasonable price for your area for lot rent only for a park full of ocupant owned homes. The idea of course.
If park paid water, use 50% expense ratio even if lot rent only... A few canned formulas like this and a few more.