Park Valuation Question with RV Income + MH Income

mobile home university
1

34 Space MH Park
No park owned homes
Lot rents close to market
14 Mobile Homes $300 lot rent
14 RVs that park on MH pads $300 lot rent, min 3 mo stay
6 Vacant
90k gross income 2016
City water (we will bill back to tenants), city sewer (billed to tenants)

The RV part has a mix of a few of mostly year round, seasonal, and 3 month min stays. Of the 90k 40% of that is from RV gross income - 36k

Mobile Home gross income is 54k

How do you all value this? Clearly upside if we fill up vacant pads, but if we convert RV to MH then we may not gain as much because we have paid up for the RV income, right?

This is considered a small park and we are not local so we are estimating 50% rule to get to net income ~45k. Question is valuation…

Many thanks!

2

A couple of things to think about on the RV side of things.

  1. 36k implies you’re at ~71% site utilization (% of time the sites are occupied; 14 sites x $300 x 12 months = $50,400). Assuming you paid the same cap rate for the RV income that you would for MH (you shouldn’t, just using it as an example), you would increase the RV site value 40% simply by converting sites to MH from RV and realizing more income.
  2. RV income does not offer the same stability that MH does, so that should be reflected in the cap rate. Call it +100 bps - 200 bps. Converting RV lots to MH will get you cap rate compression assuming you paid a higher cap rate for the RV income.

Hope that helps.

3

Hello,

Billing your full time residents for water and sewer is an obvious a great business decision: Consider billing seasonal guests; We have the capability to offer per-pay for water use via credit card or bill daily, weekly, or seasonal directly to the tenant; In most cases all billing fees can be passed through to your seasonal RV tenants.

When water conservation becomes everyone’s responsibility, your guest might wash their RV (only) once a week instead of everyday.

We’re here to answer your water sub-metering questions.

Sincerely,
Dan Helton
President
Southern Water Management
727-827-4509 727-421-9695
Dan@SouthernWaterManagement.com