How are you valuing MHCs with a big number of POHs

[Jon Dorsey]

I’ve come across a few MHCs with a good number of POHs in them. The problem comes that the seller is CAPing the POH rent which can be pretty substantial. 

Example Property:

Physical Occupancy: 60%

Economic Occupancy: 100%

TOHs: 70

POHs: 30 (mid-late 2000s models)

GI Lot Rent: $360k

GI POH Rent: $162k

Public S/W

Exp Ratio: 40%

How are you approaching these properties in today’s environment when it comes to valuation? 

If you don’t include POH rent in valuation, how do you present/discuss this with the seller?