Whether It's Worth A Look To Make An Offer

9 Replies

Hi BP -


I've been considering MHP's for a couple of years now. I came across a park in GA and the off the top numbers are as follows. Asking is $1,295,000. All city utilities. 41 pads. 35 occupied. Avg lot rent is $537. So I went with 35 x 537 x 60 = $1,127,700.00. I'm not done with complete market analysis but this is my neck of woods and I know this MHP has been around and stayed full for years. Is the formula I used providing close enough numbers to be appealing to put under contract? I'm sure after it's all said an done with due diligence there may be a chance to get it below asking. Thoughts? Feel free to pick this apart.

I'm not sure what part of Georgia we're talking about, but $537 per month in lot rent is extremely high for that state. The U.S. average lot rent is around $280 per month and the only way I see this lot rent as being accurate is if you're in a hot suburb of Atlanta. Are you sure these are not 35 park-owned homes renting (including the lots) for $537 per month?

If that truly is the lot rent, then you should put that under contract immediately as the seller's price is way too low for that.

Any contract you submit should have the standard due diligence and financing contingencies in it. The earnest money should not exceed 1% of the total price.

@Frank Rolfe ...you were exactly right. The realtor stated that they're all PO and that's the flat rent. Since the sellers own the land & homes they do not separate the rent amounts.

So now you need to know two additional pieces of information to calculate an initial value:

1) What is the market lot rent?

2) What are the ages of the homes (1960s, 1970s, 1980s, 1990, 2000s, etc.)?

1% earnest money is standard industry practice, but like anything it's completely negotiable. However, remember that all earnest money is at risk regardless of what your contract says (all it takes is for the seller to file litigation and it will be frozen in the account until the lawsuit is settled, even if that takes years) so put up more earnest money than you can afford to lose and still be a happy person.