NOI calculations when analyzing a small park

3 Replies

Im analyzing my first MHP and the seller didnt include property management as an expense when calculating his NOI. Even if it will be self managed do should I still include management cost as part of the operating expenses? From what I can tell he is over valuing the property based on a unrealistically low operating expense. Keep in mind this is a small park (12 trailers).

As this process continues along I'm sure I will have more questions so I thank you in advance for your patience. 

I'm pretty sure there's more management in park owned homes than land leased ones so you probably know that. I've never purchased a park but I like to analyze them for the one day I plan to buy one or three.

I'm guessing the record keeping isn't very good. I would use all the categories that fall into the expense category and ask the seller if he can give you his tax return so you can use accurate data if he has no other records. That might be a fat chance answer but it's what you could use if he'll give it to you. Otherwise, the book I read says 40% of the gross receipts is considered an avg amount of expenses and 50% for park-owned homes. If you present that information to the park owner along with your offer (which I bet will be much lower than the asking price) I bet if you say this is the best you can do based on the available information you might be able to get the owner to help a little better with what the actual expenses are.

Yes, include management.  And get used to owners and brokers overvaluing their assets...that's business as usual.  Figure out the true value and what it's worth to you and you will be good to go.

Thanks for the fee back. Unfortunately I think the seller and possibly my broker are over valuing this property.  11 of the 12 MH are park owned and in rough shape. The owner is claiming maintenance cost is less than $1000 per year for each home. Based on some rough numbers the park is worth 200k max but hes asking 550k. 

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