MH Valuation on 1st park--please


#1

Please help with valuation on my first park and provide any thoughts/concerns. I attended Frank’s bootcamp and following his guidelines and diligence manual, but want to take advantage of this forum with all the experienced operators and investors out there. Park details below:

56 total lots
54 occupied and tenant owned
1 abandoned POH
1 vacant lot

lot rent officially at $110, but owner bills back the water according to #of people in home ($20 each additional person). So, total rent avg is about $155 per lot. I’m a little confused on this type of billing—as new owner, I would install water meters and bill back to tenants in a more equitable way)

City water with septic tanks

In rural area, but metro area is 250K+ and growing last few years with federal government being largest employer.

Net Income 46,134

Seller asking and will finance $550,000, 20 year at 5.5%, 7 year balloon. 30% down payment.

After my valuation, I feel we need to be at $515,000.


#2

Any idea on what maket lot rent is?


#3

54 # of lots x 110 current lot rent x 12 months x 0.6 (water paid by park, septic) x 10 cap rate = 427,680 (value of property) Is this correct?


#4

market lot rent is $150-170


#5

that’s correct. although the park is paying for the water, he’s really billing some of it back by adding it to their rent, based on occupancy number. At $515,000 I am obviously paying a lower cap rate but feel there are upsides: seller financing on good terms, raising rents, full occupancy with only one park owned home.