Calculation question

Newbie here:
Trying to figure out the calculations to buy a park. So from what I have seen there are 2 different ways to calculate what a ballpark price should be on a MHP.

  1. lots x rent x 70 (let say tenants are paying for water and sewer)
    25 x 250 x 70 = $437, 500
  2. lots x rent x 12 - expenses x 10 CAP
    25 x 250 x 12 = $75,000 (.3) = $22,500 (for expenses)
    75,000-22,500= 52,500 with a 10 CAP = $525,000 for a park

So… there is a huge difference in the price. Which one should I be looking at? Am I missing something?

Your second method is not a “ballpark” estimate. It is the way to calculate an actual purchase price if the expenses are known. You would use the first estimate as a ballpark when you don’t know expenses and are trying to get in the right neighborhood.

Although, $22.5k expenses on a $75k gross park is only about 30% ratio–probably on the low end. This is common if you are relying on pro forma numbers provided by brokers or mom and pop sellers.

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