@Joshua McFarlin Hard to offer concrete suggestions without knowing your investment criteria, parameters and constraints. Sourcing quality deals seems to the biggest impediment that most investors are facing. There are deals out there... most suck (lol!).
@Hadar Orkibi Likewise. I did not know you are also attending the event. Looking forward to it more now!
@Omar Khan Making It Happen all the way from NZ man. Looking forward to it!
BTW, Great Podcast at J&G, keep up the good work!
@Joshua McFarlin From my perspective, and this is just one man's opinion, Cap rate and DCF both have their place to value MHPs.
Usually Cap Rate gets me into the ball park and facilitates the decision to make an offer or not and at what price. Once DD has stared and I can flesh out the operational details like what will CapEx look like month 15 when I have to replace XXXX and this county adjusts taxes biennially so in month 21 I can expect a 10% increase. Once you have that level of detail a DCF makes sense, but you only get that once you are in DD.
Like @Omar Khan said, valuation isn't the hard stuff. Sourcing deals and the ability to run a park are what hold most investors up in this niche.
Check out the Mobile Home Forum here on BP and the forums over at Mobile Home University to start learning about the unique parts MHPs.
Check out...…………... mobilehomeuniversity.com
@Joshua McFarlin , below are links thorough posts covering the basics of MHP valuation. Enjoy.
Fees standards to do quick evaluations. Read thru the links that @John Jacobus posted. The book that was mentioned is good resource.
Cap rate is based on the net operating income of the property. Like @Omar Khan suggested, finding quality deals is a little harder right now in the cycle.
Quick evaluations are as follows, lot rent x number of occupied lots x 30 or 40% expense ratio(depends on who pays utilities) x 12(to annualized)=net operating income (NOIthen you apply an appropriate cap rate. Industry standard is 9-11%. divide the NOI by your cap rate. Do it in decimal form(I.e. 10% is .10).
These rules only apply for parks that aren’t in California or Florida, below 25 spaces and/or that have lot rent below 175 dollars.
Keep in mind every park is different, what your financing source is is important, what kind of capital your bringing to the deal, timeline of investment, and what overall exit plan of the park is for you as an investor based on your goals.
No it is right. You gotta remember that the cap rate is a ratio between purchase price and NOI. So you change one of the numbers and something else has to change. The higher the cap rate the closer the NOI and purchase price will be. So when you went from a 9 cap to a 7 cap that distance grew.
@Ryan Groene why did you say above that those valuation metrics do not apply to parks in FL?
I am considering buying a park in Southwest FL. Any advice regarding what I should look for or consider out of the ordinary would be much appreciated. One obvious concern of mine is hurricanes, and I’m not sure if I should avoid MHPs in FL for this reason alone.