How to find a value for a small park with a stick built home also

Question

I am looking at a small mobile home park (7 spots) it is on 1.5 acres and also has a 3 bedroom 2 bath stick built house.  The park calculates out to being worth 235,200. (lot rent x 12 x 7 x .70 divided by .1) But how to I calculate the stick built home.  If it was not attached to the park. I have calculate the home with a comparable market analysis and come up with a value of $190,00.  235,200 +$190,000 =$425,200.  The asking price is $400.000.  So it looks like a good deal? But is it?  Is there a different way I should be calculation the stick built home?

Stephen Franco · Answer

I will preface this by saying I have zero experience with mobile home parks, so take what I'm about to say with a grain of salt. But I would not use full comp on the stick build home. The comparable homes in the area that you are using, or on lots with land where people will have their own property and not be bothered by neighbors and specifically not be bothered by mobile home park neighbors. I would imagine there will be fewer buyers of that stick built home because of the mobile home park, which means that stick built home will not have its full comprable value. Again, I don't know anything about mobile home parks I'm simply saying that most of the sellers or rather most of the buyers that I sell finish retail Homes to wouldn't want a park in their neighborhood let alone yard

Jeffrey H. · Answer

A 30% expense ratio for a park this small is not correct and rarely possible unless you're running a trailer park - you need to be going with closer to 40 or 50% as there are no economies of scale and your vacancies will be felt more.  This also assumes the Park is on city water and sewer and not well and septic...

As far as the stick home goes you should seek to purchase the property without it, but if you have to acquire it then yes using comps is the correct approach.  You end goal should be to sell the home unless you're okay making repairs and having the additional management overhead.

Hopefully there is upside to the $400 lot rent and means to cut expenses further so that the deal is more attractive.  Assuming your 190K on the house is correct and my lot rent calculation was right you should be looking to offer closer to 7 lots x $400 rent x 12 months x .5 (net of expenses) x 10 = $168,000 Park value + $190,000 for the house is $358,000.

It's not far off the asking price, but you need to be very comfortable with the house value and your plan for it.  Comps can be difficult for homes in a Park unless it's situated far enough away it feels separate, so you need to account for that.

After you have the Park under contract you can get the financials from the Seller and see their expenses.  You want to calculate your pro forma based on how YOU will run the Park not how they have...