Assigning value to POH's when figuring out the value of a MHP

In figuring the value of a MHP for sale, I should only count the lot rent for both TOH’s and POH’s, according to Frank’s advice…right?

However, if the POH’s are all paid off (i.e., there is no mortgage payment due on any of them), then does that mean that I should count the total rent generated from the POH’s towards the park’s value?


No. The cost of maintaining the homes long term will generally negate the rental income from the home rental. The rent will be a wash. You are best to sell them asap for many reasons.
Assign a low value to the homes based on their age and consider that total toward a purchase price on the community. Keep in mind banks will not likely finance on the home values.

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Thanks! I’m actually looking at a park for sale that has a large number of POH’s. The seller is counting the income from them, as well as lot rent from the TOH’s. And they show no expenses related mortgages on the POH’s, so I figured maybe they are all paid off, leaving only upkeep charges on the POH’s expense line.

If that IS the case, will banks finance on POH’s full income, or only on the lot rent portion of the POH’s income?


Lot rent only. The home rent in excess of the lot rent will pay for the upkeep, taxes, insurance, but probably not all of it.

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THANKS! I appreciate your help!

The bank may not lend on the POH, but can be value to POH in some cases. You need to know the rents. Specifically, the difference between the lot rent and the total rent (POH rent and lot rent). For example, I’m thinking of one specific rent controlled park where the lot rent including trash/sewer/fees is $432 and a 3BR/2BA 24x40 960sf home rents for $1,695. After subtracting the lot rent, the home brings $1,263/mo, $15,156/yr. The cost of maintaining that home is nowhere near that. Assume $200/mo or $2,400/yr for maintenance/repair. That leaves $12,756/yr net rent. Subtract the lot rent of $432/mo, $5,184/yr. That leaves $7,572/yr net profit from the home rental, which at a 6 CAP is $126,200/value for that one POH, on top of the value of the park/homesite.

These are higher rents than much of the US. In many areas of the country, the POH rents won’t be much higher than the cost of lot rent plus maintenance/repair. So, for most areas, what I’ve written won’t apply. But it’s worth mentioning. If evaluating a park in higher rent areas like the real-world example I’ve given, using the rule of thumb “Lot rent only” would undervalue the park.

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Thanks! Good to know.


Just so I understand what you are saying …

you subtracted the lot rent in the first step that brought it to the $15k/yr then took away the maintenance cost which brought it to $12k then subtracted the lot rent again to bring it to the $7k …

why would you subtract the lot rent 2x’s?

that is the only part I didn’t understand.

Steady consistent maintenance of your POH rentals in conjunction with solid record keeping of maintenance costs allows you to make good buying decisions. We pull in an extra $300 to $350 on all our POH rentals above and beyond lot rent because we take care of them. Our net cash flow is double if we just had a TOH park. That is after expenses.

If the seller has no maintenance records on his POH rentals that would be a very concerning indicator. Depending on the condition of the homes… maybe not a deal breaker but concerning.

In being a member of this community for a few years I have come to believe my situation may be a bit of a ‘one off’ as I have stout POH as rentals in a very high demand rental area.

Can you clarify this statement? I thought you were in support of POH’s (under the right circumstances), but this statement seemed to be at odds with your prior comments. Did you mean to say POH rather than TOH? Thanks.

Sorry Mick
We have a park with 13 POH rental units in one of our parks. We take very good care of them and with the additional rent we double our NOI for that park. Our pad rental is 325 and we rent our homes for 850 per month. The rental portion of these homes 525 per month is major lift to our parks NOI.

That sounds about right. If you were to purchase a $40k home for $4k down and $36k at interest rate of 10% for 10 years, you’d be paying $425 plus lot rent is $325 so that’s $750 plus escrow $1200 ($100/month) for taxes, insurance, and maintenance equals $850.

If you sell it, the math is the same.

So it’s a coin flip whether renting or selling is better. Depends on the maintenance.

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It is hard enough to get tenants to maintain homes that they own and I have the ability to fine them. I can not imagine what it would be like to try and deal with them as renters.

It seems to have been a much, much lower class of people that has ever approached me looking for trailers to rent than buy. They always have some crazy story and they need to find something ASAP. I have always felt relief to be able to say sorry we don’t have rentals, this is a community of home owners.


Great discussion for valuing homes for acquisition purposes.

If you are valuing park owned rental manufactured homes for insurance purposes, I recommend the following formula:

Cost to purchase a similar age/quality home, plus
Cost to transport the home to your park and install it, plus
Cost to add any typical upgrades or improvements your standards demand

NADA and other automated values often produce strange results.