Posted by Craig McCracken(AL) on July 19, 2006 at 19:14:57:
I know that generalizations are just that, but what would be a good rule of thumb here. Say I found a 10-12 lot park with around 20 year old MH’s that are all rentals. It would be a total package buy with well water/septic systems and individual electric meters. Also it is on the river. In my area redneck river rats and MH’s go together. 
42 space mhp valuation - Posted by thoughtgang
Posted by thoughtgang on July 18, 2006 at 12:01:55:
have a park i have some interest in. some data…
small city location
40 filled lots with no park owned homes renting at $240/mo
2 open lots with pads
2005 gross income=$82,000
2005 expenses=$37,000
city water/city sewer
does not have individual water meters-this is the source of 50% of his expenses.
owner willing to finance 75% of purchase price at reasonable rate with baloon payment in 5 years…
any thoughts on a rough value–i came up with one but i want to know what you guys come up with…thanks.
Re: 42 space mhp valuation - Posted by Gary
Posted by Gary on July 18, 2006 at 22:27:07:
Something is amiss. His 2005 gross would be $115,200 “if” all 40 were in park all year, he was getting $240.00 lot rent all year, and he was successful in collecting the rents. With $37,000 expenses “if” true value would be determined by the return you want for your time and money. I like at least a 15% cap on paper but love 18 or 20%. What grade is park and how many major repairs will you need to endure? At a 15% cap, $300,000 is your target. Collect all the rents and you will be rewarded with a cap of 26% for doing something the old owner couldn’t do-manage the property. You say $300,000 isn’t possible, have you offered $300,000? What you really need to look at is the ROI. Say you end up paying $420,000 or $10,000 per site, you have invested $105,000 of your money in the deal.With 40 rented your cash on cash return is 74.5%. Add appreciation, forced or otherwise, depreciation to keep from sending all the profit to the IRS, and the piddly amount you will pay down the loan,and you end up with a heck of a deal. Oh,how I love real estate.
Re: 42 space mhp valuation - Posted by Kenneth
Posted by Kenneth on July 18, 2006 at 19:17:36:
On a 10% cap rate this park is worth $450,000.
If you pay anymore than that,you are paying the owner for YOU cutting expenses,increasing rents,solving management problems,etc.
Why would you do that.Franky,a 10% cap rate is generous.I buy on 12% or better or No Deal.
Re: 42 space mhp valuation - Posted by Sailor
Posted by Sailor on July 18, 2006 at 16:53:51:
One thing that worries me about this scenario is that I don’t see
the “up” side on this deal. Yes, you can decrease the water bill &
rent 2 additional lots, but how can you increase the gross? Can
you add more lots? Use attrition to add Lonnie deals or rentals?
Turn around & increase rents? You want to be able to make this
mhp something better to increase its value so you in turn can sell
to someone who also has room to add value to the deal.
Otherwise, you are buying a j-o-b. When were rents last raised?
If they were in the past year, the seller has only been able to
collect 75%, & that signals mgt problems. Do you have exit
strategies? How w/you handle the balloon payment?
I like the city water/sewer part. Is there potential for
development for other use down the road? If so, check your state
law for what you have to provide to tenants–you could owe them
lots of relocation $$$. Lin is right about pinning down any
infrastructure problems. My water bill went up $30 this month &
I’m spending a lot of time trying to identify the problem.
Please don’t think of questions as criticisms of your potential
park. Just want you to have the best info so you can make the
best deal, kid–
Tye
Re: 42 space mhp valuation - Posted by Lin (NC0
Posted by Lin (NC0 on July 18, 2006 at 15:10:15:
40 lots X $240 (rents) = $9600 X 60 (multiplier for occupied lots) = $576,000
2 lots X $240 (rents) = $480 X 30 (multiplier for unoccupied lots) = $14,400
$576,000 + $14,400 = $590,400. If the asking price is anywhere near this, it warrants further exploration.
The 60/30 rule is one quick way to see if the deal is worth investigation.
What we don’t know, but would probably like to know, is if rents are high, in line, or low. Is there upside that you can capture?
The high water bill may be a sign that there are leaks. All the electrical boxes and lines, sewer lines, and water lines should be investigated during your due diligence for potential problems that will cost you $$ down the road. Yeah, I know that’s obvious, but there are plenty of people who don’t do that. I’ve met them!
Lin
Re: 42 space mhp valuation- 60/30 rule - Posted by john
Posted by john on July 18, 2006 at 17:10:15:
does the 60/30 rule work for rental homes as well as lot rents?
in other words 17 lots with rental homes at $330=5,600 x 60 = $336,000?
Re: 42 space mhp valuation- 60/30 rule - Posted by Lin (NC)
Posted by Lin (NC) on July 19, 2006 at 07:26:18:
If you value a mobile based on income stream you’ll end up paying much more than retail for the home. The people I’ve met who do turn-around parks or buy parks with park owned homes break out the park owned homes from the rest of the real estate and try to negotiate the value of those separately - hopefully somewhere close to wholesale.
Re: 42 space mhp valuation- 60/30 rule - Posted by Sailor
Posted by Sailor on July 18, 2006 at 19:22:29:
If I was selling, I’d love to do it that way, but buying, I wouldn’t
want to value a tin can the same way as RE.
Tye
Re: 42 space mhp valuation- 60/30 rule - Posted by Craig McCracken(AL)
Posted by Craig McCracken(AL) on July 19, 2006 at 19:26:02:
Hi Lin,
I’m real new so please bear with me on this. I have located a 10-12 lot park that is all rental. Would it be reasonable to value the MH’s at say 1500.00 each and the land at say 3-4K per acre ? These MH’s are around 20+ years old and raw land in that area is going for a little more. I’m discounting the land because it is a park and not an estate lot. If I can get the figures to work so cash flow will be enough to give me a profit after some hold back for expenses and I can get owner financing what do you think ?
Craig
Re: 42 space mhp valuation- 60/30 rule - Posted by john
Posted by john on July 19, 2006 at 15:11:33:
are mobile homes from the late 60s to early 70s which are only rentals really worth anything in a park? how do you value a park like that?