Evaluating POH Parks


#1

I have a few parks I’m looking at where the only income is POH rental income area. Lot rent is not even mentioned.

How are you guys evaluating these parks? I read on here that I just have to educate the seller that a bank won’t lend on the rental income. Is that the answer?

Also, I had a Broker telling me that you can’t just give POHs a “shell value”. They at least need to be valued at lot rent. Is that just BS that brokers try to sling?

Thanks for the help!


#2

I’ve actually had a broker tell me POH parks are “preferable.” Who knows what he was smoking. Now, back to your case… do you really want all POH’s? I mean, really? If I was to value them, I would consider only the lot rent. I would hope the trailer rent covered the maintenance cost, and additional turn-over. But you have to value at least the FMV of the lot rent I think…


#3

No, I’d rather have them converted to TOH, but I was just wondering how to value them so as to make a competitive offer. There are no TOH in this particular park, so 0 x lot rent would be 0 and that’s not competitive! Lol.

Also when we’re talking about “occupied lots” for our calculations, does that mean occupied even if they’re a POH?


#4

When brokers are pushing or people buying parks exclusively that are totally POH’s we know we are close to the bottle of the barrel also parks that collect rents weekly. The above mentioned properties are last to sell and also very difficult to resell in a NORMAL market ( very liquid). Renters in POH’s are a very poor risk in a declining economy which will happen. Why are you even looking at parks full of POH’s; why do you think the seller went that way–worst than Motel 6–oh they will leave a light on!!! Are you having trouble finding parks with tenant only owned homes??? Even Frank does not favor parks that are full of POH’s–what is going on???


#5

sorry bottle was to be “bottom”–I am sorber!!!


#6

Haha I understood your meaning. I’m looking at it because I saw the fact that it was all POH as an opportunity. Get in there, convert them all to TOH, and increase the parks profitability. But idk maybe I’m wrong


#7

I spoke to a park owner who only does POH rentals. Other than the increased cash flow, he said that the tenants on LTO contracts typically leave after two years and the opportunity to get inside the home to perform routine maintenance keeps the home in better shape. Just something to think about…


#8

My plan was to make an offer based on the lot rent. Then go in and sell all the homes to the tenants for $1 or something, and convert to a TOH park.

Am I wrong in thinking there is opportunity in an all-POH park?


#9

Maybe we can have a conversation on this level–since we are talking about parks probably over 30 years of age WHY would the spaces not be filled with tenant owned homes only and no empty spaces. What is the average age of homes? or has the present owner tried to replace at least 5% of homes with newer homes every year?? A park full of rentals is ??? how desirably and if wanting to have rentals the apartment business can be entered at a higher cap rate with a greater return. What are Frank’s comments about all POH’s parks; since he owns over 150 parks??? Most good parks are not being marketed since owners cannot find good replacements. POH parks are bottom of the barrel and a sign that there are way to many buyers for what is available. The NORMAL maintenance needed for old trailers may seen like a good cash flow but in reality it is a break even situation unless it turns into slum lord business which than makes cities and people in general negative to the mobile home park business. As to owners of such parks would you have your family live in such–why not???


#10

You can look at what comparable parks charge for lot rent. Remember to adjust for who pays/provides utilities. Then figure out how much you could sell the POHs for. Discount that by some rate because the trailers will probably have to be sold over time on lease credit or lease option contracts. Alternatively, you could estimate ongoing maintenance and repair costs on the POHs subtract them from cash flow and value the park that way. If there are a lot of unoccupied POHs in various states of disrepair the current park owners probably haven’t been spending enough on repair and maintenance. Ultimately I don’t think you want to be doing repair and maintenance/have park owned homes because it is a lot more management intensive and you value your time/want scale your business.


#11

Value the park on lot rents only and the houses on a separate deal. If you don’t want to be the landlord on the homes then sell them to the tenants.

I have a park with POH and TOH and the cash flow is good. I am a landlord either way after all right?