My husband and I are currently evaluating a park that seems to be a good fit for us, albeit overpriced, as most are. This would be our first MHP purchase so we are new to this but did just attend the boot camp in Orlando and really learned so much in those three days.
The seller’s asking price is about 30% more than the number we got using Frank’s quick evaluation formula, he’s also claiming about 10% expense ratio…which seems very optimistic. The MSA is good, economy, etc. are all healthy. I believe it is in a flood plain though so flood insurance may be a large expense. Water, sewer, garbage, power all direct billed and paid by tenants. The park has mostly tenant owned homes with about 25% poh’s that he says were sold on rent/credit agreements and will be paid in full in about 3 years. The rent/credit trailers are mostly 80’s 90’s models with recent repairs, new roofs and I think about B-C condition.
My question is: Do we cap the income from the rent/credit park owned homes that are under contract and have been ‘sold’ to the tenants? I know we should never cap poh’s but what about rent credit homes? They haven’t bought them outright, will ideally be paid in about 3 years so haven’t really been sold as he says but he has received deposits and rent towards purchase each month. How do we cap that income?
There’s also a large storage shed that he gets rent for each month- that is real property but how is that capped?
Also, looks like the seller has left out some expenses in the P&L (big surprise) which will account for his unrealistic low expense ratio. I plan on getting more info from him. But, if the tenants all pay their own utilities, water and 75% own their homes really how much is a realistic expense ratio for a smaller park (under 50 lots) with no amenities and a live in park manager? 25%?
Any help is greatly appreciated!