Extra acres in mhp

[William Simmons]

Howdy folks, just wanted to know, do u guys give any value to extra acres when buying a mhp property. I'm looking at one now that has 20 unused acres, though it's nice, it has no real value to me and my offer.  The 20 acres has value, yes, just not to me and I don't really want to pay for it.  What do you guys do in these situations?

[Curt Smith]

@Account Closed You are using multifamily approach to NOI which in the end after backing out vacancy you end up at the same point. I don;t know why MF does that its silly and circular. The only reason I can imagine why total doors x max rent x 12 is used for NOI in MF is to invent some puffed up illusion. Using permitted lots, occuped by homes or not in MHP is just nutz. No homes on those empty lots!!

Being straight forward... and how MHP folks think.

NOI = (lots) x (12) x (lot rent) x (expense factor, take 30% or 0.7) = NOI for a lot rent park.

But use this for park owned homes, rent, parks as well just find prevailing lot rent.  Sellers with mostly park owned homes will arrive at a much higher asking price since they cap rate the home rent as well as the lot rent.  And figure in an unrealistically low expense ratio.   Bank appraisors won't do that so when you offer you shouldn't offer more than what the bank will value the park as well. 

Value using the lot rent approach = NOI per the above approach / 0.1 (10% cap) add in a nominal value for the homes (say $3k each). = Offer price.

Frank of Frank and Dave uses expense ratio of 40% or 0.6 if private utilities like septic and well.  30% if public utilities.