Struggling with MHP Valuation

[Austin Works]

I am considering buying my first mobile home park, but most information online is specific to the lot rent only model, and this park owns and rents all homes at the moment. What is the best method for putting a value on this? Numbers are below.

2019 income

$78,196.55

2019 Expenses

$24,588.40 (does not unclude any debt service payments)

NOI

$53,608.15

Asking price: $400,000

12 lots, 12 park owned mobile homes, all of which are older and in poor condition, but all are rented. 

[Frank Rolfe]

Let's first start off with what you're trying to do with this. If you are seeing this as a "detached apartment complex" then you can use the home rent. If you are doing it as a mobile home park, then it's lot rent only. The lot rent only formula is not going to even touch that lofty valuation. I am familiar with West Monroe, Louisiana and that alone would scare me off this deal just because of the fact that it's 12 old homes there. Your exit strategy will be difficult at best, and there's probably not a bank on earth that would finance this deal. On top of that, even if you look at this as a detached apartment deal, the expense ratio is closer to 50%+ and not the ridiculous 30% this seller is claiming to hit. Remember that the standard expense ratio on lot rent alone is 30% to 40% (on deals under 20 lots typically 50%), and the standard home expense ratio is much higher (Repair alone can run $100 to $200 per month on those old homes).

The bottom line is that I would punt and find a better priced deal that is strictly lot rent only.

But again, everyone has their own goals, and I don't know what your aiming for.

My goal is just to keep you out of trouble.