If the market rents are 400-500 thats huge…
So just on a realistic possible valuation on market rents, 33 occupied lots 33x400x12 = gross annual revenue of 158,400. Lets say its a 30% expense ratio so NOI is 110,880.
I know frank and dave advocate the 12 and 10 caps but really these days, you might be 8-9 caps for a park like this. So lets just say 9 cap …
That sticks the value of the park at market rents in the neighborhood of 1.2 M.
So while on the surface this appears to be a dud, really there could be something there. Granted you may need some time to creep up to market.
Really if you can do this… he’s at 900k… POH are 95k. Have him retain those. So then you are at 805k for the park. 10% expense ratio like @Dominic730 says is crazy on real world numbers ( and also remember that the 30% is rule of thumb but verify what you can for how you run it and that might skew your numbers a bit) . But it doesn’t do anyone good to try and tell him he’s nuts. Just tell him, the way you, and most other buyers will run it, you will have to compensate a manager, the work he is doing free, you will pay, you have to pay an accountant to file a return , have a dedicated park line, pay maintenance calls etc.
So its being real amicable. You have an additional 20k of expenses but really he may not sell the park that cheap.
So you meet in the middle if possible. Will he consider 700k for the park , he keeps the homes?
So while you are overpaying for the park today , can you realistically get the NOI to 70 k quick? Then to 90, 100, 110?
A deal like this take a but of subjectiveness to it.
I don’t think people should over pay for parks but really you might miss out on this deal because if I came across it, maybe id pay 750k and be able to grab it.
If he’s a long term owner, id say you have about a 35% chance of seller financing. So maybe you can cone up a bit more for some better terms.
All in all, for me, i def think there is something here but you really have to understand it, weigh the upside etc.
Good luck and let us know if it turns out for you!