Counting Park Owned Home Rent


#1

I am looking at a park and the flier does not include the park owned home rent. My question is why? The rent is part of the income of the property?


#2

Generally, the home rent revenue gets gobbled up by the home repair expenses. Smart brokers won’t include it


#3

It’s typically not included or included at a discount because lenders and appraisers will not value that income the way they do the lot rent. There is a much higher expense load expectation for rentals + it is assumed that these renters can simply “leave in the middle of the night” as there is nothing tying them to the home (home ownership, built up equity, etc)


#4

So do you take expenses related to the park owned homes out as well?


#5

Well the ideal situation for a broker analyzing the deal is if the owner separates the home rental expenses from the regular lot rent only park expenses so that we can compare. If they don’t do that, you can use a standardized expense ration that appraisers would use. that percentage is typically related to the quality of the park owned home but you’re looking at something ~50%