Valuating a Park?

[Kevin Koone]

I'm looking at park in a smaller town, but it's less than a mile from a Wal-Mart Supercenter.  None of the homes are park owned.  Lot fees are $100/per month.  25 of the 26 spots are filled.  The hairy part to me is the current owners brother and nephew own 21 of the homes and they rent them and pay the monthly fee to him.  Otherwise, things look fairly good.  Tell me what I need to ask and consider please!  Thanks.

[Jeffrey H.]

You may as well treat these 21 homes as if they're Park Owned Homes if the tenants do not have control of them.  What happens when you raise lot rent up to market values, which may be 50%?  They may stage a coup to have them all hauled off or sold to the nearest crackhead.

I would make your offer contingent upon purchase of the homes as well.  Put a provision in your contract that all title for the home must be included at closing, and for any titles not provided that the title company shall deduct 2K per home for your time and effort to get these.  I also assume you're on city utilities, and that these are directly paid by tenants.  If not add to the expense ratio below...

25 Homes * 100 lot rent * 60 (multiplier for ~12 cap and 40% expense ratio) = 150K

Assuming these 21 homes are in varying shape you will probably offer a blended average of 2K per home.  Some may need to be hauled off, and others may be ready to rent and worth 10K.  Inspect each home with a professional if you don't know how to check the condition and repairs.  These homes will only be worth what you can sell them to the tenants, and I have never seen very expensive homes where the lot rent is $100 per month.  21 homes * 2K blended rate = 42K

150K + 42K = 192K

I would not buy this Park without addressing the home ownership model in place today.  If you acquire it as it sits you will get burned.