MHP... Deal or No Deal?

6 Replies

Looking for some advice and tips

48 lots

95% occ

lots rent average $365 ( some less some for more ) 

water and sewer ( electric individually metered )

Population 20k (large retail stores within 5 min.) nearest 50k pop. 40 miles away

Average homes sales 100k Avg. rent 1bed $600

Asking 1.3 ( owner negotiable and willing to finance with 30% down)

What should I offer BP? There is a small house ($750 rent) and rv parking ( 4 spaces) which are not included in these numbers

Lot space of surrounding areas are $395 but those parks (2) are lower grade parks compared to this one. I believe the lot space can support $400-425.

How can I determine what My lot space should rent for?

Hi Anthony,  Figure out area lot rent by googling:  mobile home park <city name>.  Then call.  Some professionals hire part time callers who have the accent of the likely resident.  But no problem if you call.

A lot rent park gets priced like this:

$lot-rent x 12 x #paying pads (ignore non paying pads) x 0.7 (for pricing figure 30% expense ratio) = NOI

It's standard to use 30% expense ratio for figuring an offer price of a 100% lot rent park.  50% or higher for park owned homes.

Price = NOI / cap rate as fraction (0.1) for 10% cap.

That's it. Forget about valuing land etc. Commercial sells on NOI alone. Ok if something special might bump price a bit.

Curt Smith, Sweetgum Properties | [email protected] | 678‑948‑7151 | http://GaREIA.com

It's nice to know that he may be under market rent but work with the $365. Using Curt's figures which I agree with gives you an 11 cap at 1.3 million. Not bad for a pad only park. However, What does the water bill look like. When water is not individually metered, it tends to be over used. The water could change a 30% estimate.

@Curt Smith "$lot-rent x 12 x #paying pads (ignore non paying pads) x 0.7 (for pricing figure 30% expense ratio) = NOI"

What if i choose to figure in a 40% expense ratio to be safe? I have seen others do a 0.6 for expense

@Howard Abell I will look into the water bill info. Thanks for heads up. I know they bill them a flat rate of $100 a month for water and sewer but not sure what the total bill is every month.

@Anthony Contento

Fancy seeing you here, glad you found something :-)

40% expenses is usually when you own or manage some of the utilties/infrastructure (well water, septic etc), and 30% is a ballpark where everything is city and direct or submetered (gas and electric excluded).

But basically take the P&L during due diligence and rip it apart. I have made offers based on rent rolls and then when I get a real P&L and real access the price drops dramatically because the owner "forgot" to factor in something.