Posted by Josh Geyser on May 08, 2006 at 13:25:18:
Eric,
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.
Josh
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,
Eric
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:
Eric,
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.
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.
Josh
Re: MHP Valuation - Posted by Eric in FL
Posted by Eric in FL on May 08, 2006 at 12:18:57:
Josh,
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,
Eric