........34 unit MHP In Arkansas......

[Tado Marinho]

Hello People,

I am looking at putting a MHP under contract and would like to have some advise on how to value it correctly; the details to hand are s follows

a) 34 unit MHP (15 of them are POH ) asking $350K

b) Total Gross income from lot rentals $5700

c) Monthly expenses (onsite manager/maintenance $1200, property taxes $50, supplies/misc $150) - I feel the expense ratio is way to little

d) tenants pay for all their utilities

are there any other expense line items that I need to look at or ask for

Also can the experienced MHP investors  please advise on how to value this property

[Account Closed]

So, $203?  I'm only asking to get a picture of the collections.  Also, does this $5,700 number include utility revenue.  When you say tenants pay for utilities, I'm assuming that you pay them and then bill the residents.

You first need to annualize the numbers.  The way this is being presented leads me to believe that you haven't gotten a look at the actuals yet and the owner just gave you a piece of paper with these numbers.  That's normal, but you'll want to get a hold of the actuals at some point.

Revenue: $68,400

These are some additional expense items:

Water/Sewer loss: Do you have a master-meter and then bill back utilities?  If so, figure on losing about 20%-30% through collections losses/leaks.  This is especially true during the first 6-12 months of ownership for a turn-around.

Management:  Their management looks a little high.  I would just continue using their number

Property Taxes:  What is the assessed value?  Run your numbers using the asking price as the assessed value to get a more realistic number of what it will be for you.

Mowing:  You have 6 lots to mow in it's current state plus common areas.  Figure about $10-15 per mow/per lot.  So, $60-$90 per mow x maybe 16 mows a year = $960-$1,350.  In reality this is a little high since you will probably just get your manager to do it.

Insurance: $50-$60 per lot/per year.

Electrical: Do you have street lights?  You'll also have to have power to those vacant homes while you renovate them.

R&M/Reserves: It's hard to give you a ballpark here since I don't know what the park looks like.  If you have a master-meter, you own the water/sewer lines and will have periodic maintenance.  The condition/composition of your road will also be a factor in this.  In addition, you may want to build in about $1,000-$1,500 per year as reserves for larger items down the road.

There will also be office, legal/accounting, advertising, etc.  These are usually very minor expenses.

I'm just going to use a very generalized 50% expense ratio.  Your expense ratio on this will likely be closer to 40% if there isn't anything weird going on in the park though.

$68,400 * .5 = $34,200 / 10 CAP = $342,000 + the wholesale value of the homes

Personally, I think you should tie this thing up before someone else does.  You can contact me directly if you need any help during your diligence and I'll be more than happy to assist you through the process.