How to evaluate a MHP with a few RVs

mobile home university
1

I am looking at a park with 200+ pads in a decent MSA market. Though each pad was developed decades ago for mobile homes, the park currently has about 30 RVs and the rest of pads are most occupied by mobile homes. I was told some RV residents are seasonal, but some are long term residents. I’m about to give an offer, and wondered how you guys would valuate the RV component of the park? For valuation purpose, can we use the same formula as used to valuate those with mobile homes (i.e., noi x 10 cap), or shall we discount the value of such pads just because they are occupied by RVs?

My initial thought was RVs are more likely to move than mobile home, so the rent may not be as stable as mobile home, but how exactly the industry valuate those? Thanks

2

I used to worry about rv’s but I do less and less. Seems to me that more and more are living in them full-time due to choosing a cheaper lifestyle and/or retirement. I care far less now as I have seen the market adjust over the last 10 years.

3

And no personal property taxes for them in many states!

4

@ellison Great question. If you have not called the MHP licencing body, do so before you submit an offer. Case in point: I am dealing with this with a part here that we are negotiating. The seller has some RVs parked on MH pads and the State came through and made him give those pads back or reduce the number of MH pads that the park has now in order to make up for the RVs. My State licencing body stated that there had to be a separation between the RV side of the Park and the MH side of the park. They can’t be mixed in. I know why the owner did that, just like your seller, they can charge more rent for a RV then MH. But watch out what it does to the licencing. Just an FYI.
Good Luck

5

For RV portion value calculation, Add 2% to the cap rate that you’re using for MH. For ex: 10% cap for MH and 12% CAP for RV.
Sounds like you can fill them with mobile homes if the RVs leave, with is nice.

6

All good points --thanks a lot my friends. Though RVs produce the same/similar rent, personally I think they are just a little bit out of place in a mobile home park. I heard institutional investors just don’t look at the parks with RVs inside, or those in flood zone.