When buying a MH Park what cashflow per lot are you looking for?
Also do you look for a certain NOI as a percentage of Gross Income?
You first look at the net income from strictly real estate (lot rent, renting of any stick-built homes and apartment) and not including an personal property income (rental mobile homes) and then apply a cap rate (typically a range of 8% to 10%)
The normal expense ratio is 30% (if tenants pay water/sewer) to 40% (if park pays water/sewer),
Cash flow per lot is not a normal metric.
@Frank Rolfe thank you! I really appreciate your feedback. I listened to your BiggerPockets podcast the other day for the second time through. Great stuff!
I've run countless NOI to Cap Rate calculations so that should be no sweat.
Was just curious about the cf part. I’ve used and have seen a lot of apartment investors use the number $150-200/door in monthly cashflow as one of their metrics. Wasn’t sure if MH parks had a standard.
Again thanks for the reply!
@Logan Hartle shift your focus to the % return on the capital you deploy into the park. As an example, let's say the price of a 50 space park is $1MM and the monthly rents are $300 per space. 50 x $300 x 12 months will give you gross revenue of $180k. Using an appropriate expense ratio (as Frank mentioned above, and in this example let's use 40%) that would give you NOI of $108k. Let's assume you need to spend $200k for soft costs and capital improvements so you have $1.2MM deployed into the park. That would give you a 9% return on your capital. If that meets your investment objectives, then the park would be worth pursuing.
Keep in mind there are a lot of variables there, to include the use of debt in the capital stack, vacancy and/or vacant spaces, POHs and/or rental income, the correct expense ratio, the utility situation, and whatever upside that may be present, just to name a few.
@Jack Martin thanks! I appreciate the feedback.