Park Evaluation


Hi Everyone,

First park I am trying to fully evaluate prior to offering.

Asking price of $679,000, NOI for 2013 was stated to be $52,077 with expense percentage of 38%. 52k / 679k = 7.7 CAP rate correct?

Not sure if it matters but expenses were high in 2013 for one time upgrades. Per Broker, “Upgrades were for trailer park sold and won’t be incurred again”. Which isn’t true because we should always budget for vacancies.

17 Lots on 1.5 Acres in California with 100% occupancy

Average Lot Rent = $262 ($4,454/month)

3 of 17 are POH, Avg = $296 ($888/Month)

5 of 17 are R2O, Avg = $226 ($1128/Month)

Valuation on Lot rent is $4,454 * 12 * .60 Exp Ratio * 12 CAP = $267,240

How do I valuate the POH & R2O income? I know that POH get an expense ratio of 50% but I’m lost on the Rent to Own homes.

If I work backwards from the NOI of 52K and want a 15 CAP - the price would be a bit under $350k?

Broker told me electrical is sub-metered and billed directly to tenants. Yes it is connected to city sewer and water. Each unit is charged $36 Flat per month to cover these 2 expenses. Chance to improve here? Get American Leak Detector out and install water meters to bill for usage?

Appreciate the help all. Hope the boot camp in Los Angeles went well for those that attended.


17 lots x $262 per month lot rent x 12 x .5 (because it’s a tiny park) x 10 = $267,240 at a 10% cap rate. Add in the value of the homes (maybe $80,000 at the most) and the total value is about $350,000 at a 10% cap rate, and that’s being way too kind.

Right off the bat, if you are trying to get to a 15% cap rate, you could not pay more than $178,000 for the lots, for a total deal price of maybe $250,000.

Besides the fact that the park is too small, it sounds like it has master-metered electric (which is a huge turn off) and too many park-owned homes (almost 50%).

Nothing in this deal is compelling, and I would let the current owner suffer with it.

If your goal truly is 15% CAP rates, you’ll need to buy outside of California. CAP rates in California is among the lowest in the U.S., only matched by parts of Florida. You need to move your park-buying focus to the east.


Your math is correct. I know 7.7% cap rates for CA may be ‘quite reasonable’ but my advice is to buy in the midwest where you can get 10% - 12% cap rates.

It will be critically important for you to break-out the numbers into 2 P&Ls - one for the real estate, and one for the ‘wheel estate.’ The mobile homes are not worth a cap rate value. They are just worth what the Kelly Blue Book values them at - or what you can sell them for in your market with financing.

It is always best to bill for water. Tenants will conserve; that’s what is right for the environment. You will increase revenues and reduce your expenses; that is what is right for your bottom line. You’ll probably also find some leaks in your water main (ALD can help there once you are billing residents and are sure you have a leak), and will want to repair those.

Good luck,



Thank you both for your help. As always, the information was exactly what I was hoping to get.


What do you mean by “master metered” electric? I was informed that the local electric company bills the tenants directly for usage so the term confuses me. I will be taking your advice and start looking east; along with focusing in on out-of-state management issues.


7.7% - while may be the norm - definitely doesn’t tickle my fancy at all. My private money partner is looking for a strong cash on cash return as well as weighing how long it would take to get there capital back. I would love to get a park in the 10-12 CAP range with the ability to “force” appreciation through proper park management techniques - very much like your most recent acquisition.

Splitting the P&L between Real Estate and Wheel Estate makes a ton of sense will definitely do that moving forward.

Can I ask you guys (and the community) what the “tipping point” is - in your opinion - when it comes to park sizes? Are there tiers in your mind (<20, 20-50, 50+ etc…)? Did you start off with a size and did that size make sense for your first go at owning a park?

Thanks again for the insight!


When you wrote “sub-metered” describing the electric, that is the standard term for a master-metered system in which each tenant is “sub-metered” and billed by the park. The correct term is just “direct billed by provider”. That’s why I thought it was a master-metered electrical system. Sorry.

On the size, my first park was 83 lots. A successful deal does not have to be that large. But I would be skeptical of deals under about 25 lots. There’s just not enough critical mass to find a bank or buyer when you get down in the 15 to 20 lot range, and that hurts or eliminates your exit strategy. On a 25 space park, if you can improve operations by $100 per lot per month, then you have a $30,000 per year cash flow, which is great. But on a 15 space park, you only have an additional cash flow of $18,000 in that scenario, and that’s hard for someone to rationalize that much effort and risk. For an out-of-town investor, one additional trip to see the park for $1,000 would knock the net down by 5%.


Thank you Frank so much. That helps me adjust accordingly. I greatly appreciate the opportunity this board present to us less experienced investors.


Hi All,

I’m reading back over the thread and realized I didn’t see any opinions on what to do with the 5 Rent to Own homes. The rent on each of these 5 homes averages to $226 per home (or $1,130 per month). How do I place a valuation on this payment stream for purchase?

Thanks again,



Don’t worry about the income stream – only focus on what the homes are worth. In most markets, a 1970’s or 1980’s home is worth maybe $5,000 or so, while a 1990’s home is worth maybe $10,000 and a newish home is worth maybe $20,000 tops. Comp the homes in the other parks and see what they sell for. You can’t cap the park-owned homes rent, only what they are worth retail. If these homes were sold on a monthly payment, then you can use the amount of the purchase less a discount of maybe 25%, but even then make sure that they tie back to a reasonable value for the home.

That’s not what the seller wants to hear, but it’s the truth.


In general, for my time and money, I look to purchase parks that are 50 spaces or larger. My first park was 66 spaces. I now have one under contract that is over 70 spaces. However the park I purchased last year was just 20 spaces. But it was a) fairly proximate to my first park, b) I secured 100% bank financing ($0-down - a ‘free’ park, woo hoo!), and c) it had the most mis-managed water problem I’ve ever seen (I nearly doubled the profitability just by billing for water and fixing leaks), and they were significantly over-paying for trash.

So with easy/obvious upside on a property near my ‘center of gravity’ in Oklahoma and with $0 down, I’m a buyer of small parks too…!

Your mileage may vary,



This gets to be tricky. If the RTO contracts only have another 6 months to run and tenants actually seem to be paying and not likely to default, then these homes have almost $0 value, since they are about to be taken away from you when the residents complete their RTO. If however the contracts have 5+ years to run, and historically tenants ‘always’ default on their homes and never do seem to end up owning them, then these homes have ‘full’ value since you really do own them and will be receiving payments on them from the current RTOer, and the next one after that, and the next…

(But remember, while the homes in a situation like that might be worth more, the park is probably worth less. Parks with high turnover and low-quality residents trade at lower values than parks with higher-quallity residents that tend to stick around and actually buy their homes.)

As always, your mileage may vary,




I agree with your last two posts in this thread – just wanted to echo “I think that too.”



Lowball offer or not - I feel that I have to let this park owner tell me no. The offer price I am working towards will likely be 50-60% of asking price.

The broker emailed back with the ages and measurements of the POH and added “Let’s pick the price that works you and make an offer on this one. Seller will carry.”

If I get a low enough price accepted, I was thinking about wholesaling it. Any opinions on that?


I’d happily buy a wholesaled park at the right price and with a fairly complete due-diligence package…




How did you finance a park with $0 down and a park that small? Every lender I have talked to wants at least 30% down and won’t touch anything under $500K.

It may be me, but it seems that all the parks in CA are grossly overpriced. I do not know where the sellers get their numbers from!


Zero down only exists in the world of seller financing, but never in bank financing. I have done five zero down deals, on deals as large as $850,000. I think Dave has done around seven. Banks will always require 20% to 30% down – that’s the number one rule they learn in banking school.

California sellers are typically crazy. The prices are outrageous. But the bad news is that there are enough crazy buyers to support those prices. That’s probably why California has such vicious boom and bust cycles.



Thanks for the response. I thought Jefferson had found the jackpot bank with 0 down. Very motivating to know that you and others have done 0 down deals that high with seller financing.

My head spins thinking of an investor that would overpay 2x or more what the park is worth. I live in CA and can’t imagine paying that price just have the CA living. CA is essentially a cesspool in disguise. It reminds me of the city in the movie the Lorax, with a wall around the town and outside lies the real land in ruins!


Fair comparison dmaxwell!

The deal in this thread is shaping to be a 0 Down park if he gets off the crazy price ledge. The owner has said he will owner finance before even receiving an offer!


We bought a park in Missouri recently for $2 million that someone had bought five years earlier for $5 million. It was an REO. It’s not just in California that people pay too much on occasion.


Good luck on the deal Moezer. I hope you can convince the seller to get off that ledge!

All the best and keep us updated!


I received 100% financing from the small bank that financed my first park in the area. I have a long-standing and very good reputation with them. And when one achieves that with a bank with less than $200mm in assets, one very quickly becomes a ‘top 5 largest’ customer of that bank, and gets the VIP treatment. So it was actually they who proposed the 100% financing.

Did I mention they also finance 100% of my mobile home purchases? At 5.75%. 10 - 20 year amortization. (Take that Legacy Housing…!) (:P)

Not to stray too far from your question, but I want to point out that although seller financing is very attractive, bank financing can have hidden benefits not found in seller financing. Look what happened here. I purchased a park that was 1/3 empty. I half infilled it with mobile homes purchased with my own personal savings. The bank took notice, and has financed all the rest in that park, plus now lent me money to purchase a second park in the area.

Would that have happened had I been ‘lucky’ and gotten the seller of the first park to carry a note? Would he have come to me after a few years and said ‘Hey Jefferson, you’ve been paying well on my note for this park I sold you. Would you please borrow more money from me to buy a park I’ve never owned?’ Of course not. Had I secured seller financing, I’d still own that first park, and it’d be stabilized by now, but not 100% full. And I would not own the second park - at least not with 100% bank financing.

That’s a long winded answer to your question, but there 'tis,