Evaluating a MHC with large number of POHs


#1

I’ve come across a few MHCs with a good number of POHs in them. The problem comes that the seller is CAPing the POH rent which can be pretty substantial.

Example Property:
Physical Occupancy: 60%
Economic Occupancy: 100%
TOHs: 70
POHs: 30 (mid-late 2000s models)
GI Lot Rent: $360k
GI POH Rent: $162k
Public S/W
Exp Ratio: 40%

How are you approaching these properties in today’s environment when it comes to valuation?

If you don’t include POH rent in valuation, how do you present/discuss this with the seller?


#2

It sounds like you already know that you can’t cap the home rent - you have to educate the seller. Tell him a bank will not lend on the home rental income, just the lot rent income and this is the standard in the industry. Perhaps ask a bank or broker to create a letter stating this. You should also educate him on the value of the homes in the park - your offer should be a wholesale price for them; after all, if you buy the park and the poh’s you deserve to sell them for a profit - you have rehab costs, marketing costs, and commission to pay your manager who sells them.


#3

What about all these brokers you see on Loopnet and others that are inflating all of it?


#4

We buy parks with lots for lease–the homes the seller is offering in the sale actually have very little to NO value! As a buyer you have a choice plus when you sell the property with out POH the sale is much quicker and easier!! WHY does any park have any POH–is there a problem with that market OR perhaps the real market has moved on to RV’s, ??? All the parks we have owned we did not need or have POH’s!! Finding a good parks with great bones is difficult–but so is finding a lifelong mate.


#5

@Jddorsey - I’ve spoken to enough owners to know that most are unrealistic in this market especially with POHs parks. If that’s the case I see what they want in pricing. If it is way off you can discuss your valuation but most of time its better to move on. Offering someone 50% of their initial offer usually doesn’t make them want to call you back in the future. It’s better to end the call follow up in 6 months and hope you catch them in a time of desperation.