Link to #3 & Results from #2


#1

Link to practice #3 - http://www.mobilehomeparkstore.com/park-evaluation-practice/park-number-3.htm

Results for Evaluation # 2

This park was a result of one of our direct mailings. The current owner is asking 2.1 million.

Thank you for participating.


Evaluation From an anonymous user. Thanks!

First I’m new and haven’t made any offers. With that being said I think this is a great idea, especially if we can get feedback from of the seasoned pros. It’s great to see everyone’s thinking and calculations. The more the better…

It is my understanding that this preliminary calculation is to determine if we want to look further into this park

NOI-$78,312

Price based on NOI-$548,184

Short basis for NOI & Price- 64 lots at $260 per=$199,680-$3900(for taxes, which will upon further due dilegnce will be more)=$195,780x40%(expenses)=$78,312x70= $548,184.

This is just for the lots so if he insistes on including the POH I would suggest he keeps that income as a side business or offer $200,000 more. As far as the house, he can keep that…wouldn’t want to mess with it in this market…unless he will part with it for $80,000(.40 on the dollar)

The unknowns(which are many for me) are expenses, and if the vacant lots have homes on them and can I fill those vacant lots and with what type of home.

My general feeling is that for my first park it is too far away(live in Florida Panhandle) and too big. I’m looking for something in the 10-30 lot range.


Evaluation From an anonymous user. Thanks!

NOI Calculation

NOI = 260*(69-5)12(1-0.325) = $135k

Price Based on NOI

Price = NOI/CAP = $135k/(0.1) = $1.35M

Short basis for NOI & Price

City Utilities, all directly metered implies only 30-35% Expense Ratio (I’ll use 32.5%)

Assume 10% Cap is reasonable (would need to verify)

Special Considerations

Stick-built home: Split off and sold, assume 50-75% of area average price (would need to verify) = 100-150k, (I’ll use 125k)

Notes on POH: From Dave’s book, I would take lower of 65% of face value or 75% of what could resell to a new renter in case of default. Will take 65% of face value for now since more details are not known = 260k

Therefore the total value would be $1.35M + $125k+ $260k = 1.76M

Unknowns and how they would affect the offer

There is a lot that could affect the offer! To name a few:

Not clear whether Electrical and Gas is included in the “city utilities” mentioned, and if not are they sub-master metered? If not included, expense ratio would increase

What is the condition of the roads?

I am not familiar with the area. I would need to verify the economic and employment outlook of the area as this could be changing quickly given all that is going on today. Could affect vacancy, rent & collections projections.

Need to verify rent vs market rent?

Need to verify that the stick-built could be split off. If not I would calculate its value base on its projected income stream.

Need more info on the notes and homes (as discussed above). This could drop what I’d be willing to pay for the notes.

Would the seller entertain financing? Could make the deal more attractive.

Everything else in Frank and Dave’s “30 Days of Due Diligence” manual!

General Feel for the deal

If it’s close to “as-advertised” (I know, hardly ever is), it seems like a nice newer park with good sized lots with city utilities in a strong area. The low vacancy could imply that a rental increase could be supported. Overall I think the deal would depend on the value that seller puts on the Notes and Stick-built house. If he is wants close to “face value”, this probably won’t work. I would want to make sure there was enough upside.


Evaluation from Brad Simmons - Thanks!

These are great