More than 75%LTV on MHP? - Posted by joedc

Posted by Marla on June 02, 2005 at 16:29:49:

Well, what is the proper or best way to price a mobile home park? I have never heard of the 3.5 times gross income to figure the sale price. However, I have heard of
using a cap rate on the net income. Is this correct ?
Just Wondering…

More than 75%LTV on MHP? - Posted by joedc

Posted by joedc on October 16, 2003 at 24:12:11:

Is there anyone who knows where I can get more than 75%LTV for mobile home park financing. I have searched all over and can only find up to 75%. I have good cash on hand but I want to use as little out of pocket as possible. I have a park with 10%CAP valued at about 220K, appraised for 215K, that I can purchase for 175K. I don’t want to put out 40K on a down payment using 175K as the lesser of the two values.

My credit is excellent (mid score is 768) and my current profession provides a six figure income. Is there any help out there or options to get 90%LTV or higher on income property like this? Please help ASAP…thanks


Re: More than 75%LTV on MHP? - Posted by Chuck

Posted by Chuck on October 16, 2003 at 10:25:47:

Read this…

wow…every investor on this board should … - Posted by Greg Meade

Posted by Greg Meade on October 18, 2003 at 07:46:07:

read this.Substitute the words MHP for apartments and you have the real life scenario playing out today! Very good post!Thx

Exactly my point (nt) - Posted by Chuck

Posted by Chuck on October 18, 2003 at 09:24:54:


every park sold with 7,8,10 cap… - Posted by Greg Meade

Posted by Greg Meade on October 18, 2003 at 10:14:22:

is doomed to fail! didn’t someone post that last week?LOL. I think you are right.

CAP rates are for Dummies - Posted by Chuck

Posted by Chuck on October 18, 2003 at 12:35:13:

I’ve yet to understand why people get excited about CAP rates (market value), NOI’s (pre-debt service and tax dollars), or GRM’s (potential gross income that doesn’t account for vacancies which could have an impact (duh) on the accuracy of the property value estimate), Appraisals, etc…

I could ramble on but I think you get my point (it’s all emotion or speculation), and none of these factors should be used as a buying guideline which ultimately determines how much “cash flow” you take home at the end of the month.

Look at it this way… would you (could you afford to) do lonnie-deals based on cap rates?

I think not.

Apples and Oranges you say… no… an investment is an investment, the only differance are the numbers and thus the risk involved.

So why are people investing (or rather borrowing) thousands and millions of dollars (along with interest), based on a CAP rate or a NOI which doesn’t include deductions for said debt service and it’s interest/rate? Don’t you think you deserve to earn more money on your investment (since your taking all the risk) than the lender will on the money they loaned you? Wouldn’t “yield” (aka IRR) be a better measure of a properties earning potential (vs risk and cost to aquire) and thus it’s investment value?

And as if those questions were not enough to make you stop and re-think things… let me pose one more… what did we use before the CAP rate concept was invented as a method of valuation and why did we change?

Two Big Mac’s to anyone who knows the answer.

Two Big Macs. Oooh, I just noticed that. - Posted by Dr. Craig Whisler CA NV

Posted by Dr. Craig Whisler CA NV on October 20, 2003 at 24:43:30:

  1. What did WE use before cap rates were invented? Answer: commom sense. I’ve always used gross rent mulitpliers in the range of 1-3 for all of my mobile deals. I still do. Granted, it might not be as accurate as IRR, but it so simple I don’t have any incentive to avoid using it. With such low GRMs I have a substantial margin for error. Big Mac #1

  2. …and why did we change? Answer: WE didn’t change. A new generation came along that just didn’t have our experience and common sense. They had never experienced the shame of insolvency or bankruptcy. They simply didn’t know any better, and they STILL don’t. We should love them to death. They are growing the next wave of don’t wanter bargains for us to capitalize on. As Jack miller says: a depression is when property gets return to its rightful owners: those who are more prudent. Big Mac # 2

Regards, doc

Believe it or not… - Posted by Greg Meade

Posted by Greg Meade on October 18, 2003 at 20:52:35:

the very first MHP i tried to buy was in Spanaway,WA. in 1978. The broker showed me sevral others and appraisals and they used a 3.5X Gross Income to appraise this Park. Sure like this better than CAP or NOI or ROI. Things have changed, eh?

Re: Believe it or not… - Posted by Chuck

Posted by Chuck on October 19, 2003 at 01:29:39:

But isn’t an appraisal just one person’s opinion of value (market value) based upon what like-properties have sold for the the past? …and wern’t those sales based upon other appraisals, at least some of which likely came from the same appraiser? …where did the 3.5X number come from? …and how did they justify using it over a lower (or higher) number?

Once emotion, opinion and speculation are removed from the equation… a true investment value can finally be determined, resulting in a positive cash flow for the investor.