Looking for some advice and tips
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.
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.
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.
Join the Largest Real Estate Investing Community
Basic membership is free, forever.