Link to practice # 2 - Mobile Home Parks for Sale and Trailer Parks for Sale
Results for Evaluation Practice #1
Link to actual deal - www.boernemobilehomepark.com/ - Asking Price - $369,500.00
I found this park by searching: “mobile home park for sale” on google. It was 7-8 pages down into the results.
Thank you for participating everyone.
By: Anonymous - Thanks!
NOI Calculation - $41950 annual
Price based on NOI - $244,720
Short basis for NOI & Price - total current rents annualized $70680 less
estimated expenses $25194 equal NOI of $41950. Using a little formula I
found on MHPStore website I multiplied that by 70 and arrived at
$244,720.
Special considerations - My calculation doesn’t account for the value of
the site built home so my price should increase to accommodate it.
Unknowns & how they would affect offer - 1) We don’t know from the ad if
there is room for expansion of the park or if all the sites are
individually metered for water. If there is potential upside in these
two areas the offer could increase. 2) In TX, this park owner would
operate as a “public utility” because of the sewer/well servicing
multiple dwellings. This creates additional expense in permitting,
monitoring and reporting of the water and sewer systems.
General feeling about the deal - I felt this one was worth a closer look
but I’m looking for a park where I can be an onsite owner rather than
investment park that I manage from afar (maybe that will come later…).
If I were looking for the latter I would have probably passed on this.
On a side note - I did get additional information on this one and I did
wind up passing…
By: Mike Barlow - Thanks Mike!
I would put the 17 spaces at a 12 cap or $290,000 (17X$300-3%Vacancy & Credit Loss Less 40% expenses leaves a NOI of $24480 (lower value because of the septic). I would value the houses 120 X the rent less expenses for repairs so they would be respectively 85000 and 50000 or $135,000. I would pay the owner $2000 per mobile X 4 or $8000. I would also give him less than 30 cents on the dollar for the cash flow from the mobiles ($200 X 4X12=$9600 or $3000. With all the income generators on $109,000 cash down payment return should be about $20,000 year one. My evaluation would be $436,000.
By: Cathysmobiles - Thanks Cathy!
17 X $300 X 12 = 61,200
1 X 790 X 12 = 9480
1 X 474 X 12 = 5688
Total Income as: $76,368
NOI Calculation - I would use: $49,640 got it this way:
17 X $300 X 12 = 61,200
1 X 790 X 12 = 9480
1 X 474 X 12 = 5688
Expenses weren’t listed so I used 30% - probably would think about doing 35 - 40% for expenses = $ 26,728
NOI = $49,640
Price based on NOI = 10% Cap = $490,000
Short basis for NOI & Price = Same as Above
Special considerations - I gave no value to the mobile homes…However, they have some resale potential if sold on owner contracts. I would take this into consideration during negotiations. At the same time, the reverse is true - homes are old, so some may need to be replaced - visual would make that decision.
Unknowns & how they would affect offer - Expenses are unknown, lot sizes, as well as the individual homes as mentioned above.
General feeling about the deal - Everythings a deal if it pencils and makes sense cash flow wise
By: Frank - Thanks as always
The NOI of the park (without POHs or structures) is $36,720, based on $300 lot rent and 40% expense ratio.
The house value is unknown, but let’s say $40,000 if you could carve it out. The cabin is worth maybe $20,000 if carved out. I would value the mobile homes at $0.
At a 10% cap, this would give you a value of about $420,000: however, there are some problems.
This park is very small. It is in a small town. It is not on city water(?) and sewer. Therefore, a higher cap rate is appropriate – let’s say 12%.
In that event, the park is worth maybe $366,000.
One big additional concern is the lot rent. Is $300 the market? Is it more or less. If the market is less than $300, which it might be, then take off some of the income to re-set it to market. Also, what is the property tax appraisal? Texas has very high property tax rates (2.5%) so that could be a significant impact.
Of course, you would need to follow the outline of our “30 Days of Diligence” book to really get a clear picture.
This is not my kind of deal, since it is way too rural and small for me. But it might be the ideal deal for someone who likes the Hill Country.