How do you value a stick built home in a park?


#1

I did a search of the forums and didn’t find an adequate answer to the question. I’m looking at a smaller park in GA with a 3/2 stick built home on it. In doing my valuation, should I cap the rental income or the market value of the home?


#2

If you don’t have the option of selling the home (not on its own parcel, etc.), then look at it in a similar way to a mobile or any other rental, cap it but consider operating costs (utilities, R&M, etc.). If you could sell it, market value may be a better way to look at it.


#3

Ok thank you. That makes sense to me.


#4

If the home can not be sold separate from the park it’s only value is the rental income. Use the NOI to calculate Cap rate.


#5

To get a minimal value you can use the 2% rule which basically states the monthly rent should be equal to 2% of the purchase price. If the monthly rent is $500 the value would then be $25,000.

Most sellers are unhappy with this valuation, but it is difficult to lose money if you buy according to the 2% rule.

It has been very difficult to buy rentals according to this rule since 2010. I try to hit 1.7% these days.


#6

Thanks for the replies. The home is on the periphery of the property so it can be sold separately.


#7

One other thing which you may know already: A stick built home that is inside or next to an MHP will probably rent for an amount closer to a MH rather than that of a stick built home that is in a regular residential neighborhood. In other words, if you’re looking at a stick built home inside or right next to an MHP, don’t count on renting or selling for normal market prices. There will likely be a “penalty” for the MHP location.