MHP Valuation - Posted by Eric in FL

Posted by Josh Geyser on May 08, 2006 at 13:25:18:

The rule of thumb I posted was based on number of pads avaialable. For most of the larger lenders, underwriters will want to see about 80% of the pads actually leased (if not more). The strength of the borrower and the park may allow for a lower number of pads being leased. Hope that helps.


MHP Valuation - Posted by Eric in FL

Posted by Eric in FL on May 07, 2006 at 14:11:11:

I posted this on the MHP discussion board as well but wanted to get Ray’s and others opinions.

Please take a look at the current numbers on a park I am evaluating and I am looking forward to your thoughts and what you might pay for the park.

Asking: 1.1 Million (69 spaces all paved roads, 21 acres)
Lot rent: $160 per lot (90% occupancy)
2005 Gross $116,000
Maintenance $ 8,000 (this is not correct so let’s say 15k)
Taxes $ 4,000 (this will most likely double)
Insurance $ 3,000
Management $12,000

Existing Assumable Financing $425,000 at 6.25% (30 yr amm)
No balloon $2586 month payment

I know that they are dreaming if they think they are getting 1.1 million but I was wondering what the forum is willing to accept as a Cap rate in 2006 and what they expect to get when investing in a park. Thanks for all your responses in advance.

Best Regards,

P.S. I will make an offer next week but wanted to get your opinions on the current numbers with no upside calculated in.

Re: MHP Valuation - Posted by Josh Geyser

Posted by Josh Geyser on May 08, 2006 at 11:39:15:

This will not answer your cap rate question directly, but from a lending standpoint I have found that Parks (where you only own the pads and none of the homes) usually value somewhat close to this rule of thumb.

of pads x pad rent x 72 = Approximate value of park

In the Parks that we have financed, this quick estimate has usually been good to work with (within maybe a 10-15% variance either way). This approach is more of an underwriter’s cash flow approach, but hopefully it can give you a baseline to work from.

Good luck.


Re: MHP Valuation - Posted by Eric in FL

Posted by Eric in FL on May 08, 2006 at 12:18:57:


Thanks for the underwriting parameters as it speaks directly to what the market sees as correct. I often think that the CAP rate really means nothing. Do you see underwriters using the number of pads actually rented or actual number available? The reason I ask is that many people may find it hard to acquire institutional financing on a turn around project. Thanks for the response.

Best Regards,