Valuation of MHP with capital investments


#1

I have come across an interesting situation/opportunity with my park. I’m hoping some of you financially savvy people on here can help me out…

My park is 22 acres with 20 existing lots. I purchased it about 2-1/2 years ago. I had to evict 7 tenants, giving me a 65% occupancy, I’ve demolished 5 abandoned trailers that were beyond repair, built 2 new concrete pads, moved in a brand new single-wide currently for sale, replaced the entire park’s water system and had each lot individually metered and direct billed to tenants by the water district, paid for permit applications/civil engineering for the expansion of the park (additional 31 lots soon to be approved), and many many aesthetic upgrades around the park (painted the park owned sheds, hauled dumpsters of garbage out of the woods line and behind trailers, etc).

To date, I have almost matched the sale price in capital contributions for all these upgrades and improvements. All that is left to do is fill the park with good tenants. A company has approached me about buying my park from me. If I sold it, I could go after a much bigger, established park I have had my eyes on for a while. To determine what I would let the park go for, I factored in the following:

Balance owed to the bank for mortgage
Money spent on capital improvements (water system, other upgrades at park)
Money spent on civil engineering for water system replacement & permitting for 31 new lots
Any other money I personally put into the business expecting to get back once the park was stabilized

Also, I have never taken any money out of the park.

Am I forgetting to incude anything here? Should I add in the equity I built over the years by paying the loan?

I know this deal will be hard for the buyer to get financed because the bank will most likely not see the value beyond the existing trailer park, but this isn’t really my problem to solve. If it doesn’t sell, I’ll just keep on with the original plan. Any advice here would be great!

Thanks,
Mike


#2

Well, yeah, sure, you want to look at all you have put into it and all you have to pay off if you take the money and run. And don’t forget the taxes. The main thing you need to know is what you will have to take to another deal. Personally I hate to leave so much unrealized potential as you have in this deal, because I have found it hard to come up with really good deals.

What was your plan for filling so many vacant lots?


#3

Thanks for the response, Randy. You bring up a great point with the taxes…I believe there is some kind of conveyance Fee when you sell a park in Maine. There shouldn’t be any capital gains since I haven’t made any money from this park and I would put it right into another deal anyways.

As far as my plan to fill it: I bought one trailer, put it on the market a few months ago in hopes of selling it and repeating the process 6 more times until it was full. I haven’t had any bites on it in 3 months. The price is fair - it’s a break even for me…I think people are afraid to buy in my park since it’s been so mismanaged the last 20 years. I also approached the dealer next door and we discussed putting model homes for sale in my park. They were favorable to it but also are the ones wanting to buy the park.

I agree with you and hate to leave so much opportunity behind with this park. The only reason I would consider it is to buy a park a couple miles away that is triple the size and turn key. (Not as much upside but still a stable investment without the huge costs of developing 31 new lots).

Again, I’m not in a hurry to sell it and would be just fine keeping it, I just don’t want to say no to a potential opportunity if this is indeed one.

Mike