What would you pay for this park

We have been dealing with a seller on a park that is about as absentee as you can get. After 2 months of digging
I believe we have finally gotten the real numbers on occupancy and condition of the park. Problem is that its a tough
one to price. This park is in a town of 200k with great demand for homes. Our test ads pulled 40 calls in one week. Onsite
manager said he has aps approved but because the owner is so absentee they cant get any answers to sell the homes

108 space park
28 occupied paying tenants
lot rents $345 includes water/sewer/trash
10 vacant homes ready to be sold that we will get the title too.
35 vacant homes that need approx 5k of rehab per home on average

city water and city sewer. no infrastructure issues except some fairly major water leaks.

We were under contract with the assumption there were 65 occupied homes but after all our due diligence we
are now having to recalculate the purchase price due to occupancy being half of what the pro forma was.

Whats the best way to price this mess.

Sounds like a fun one - here’s how I would value it:

28 occupied Tenant Owned Homes (TOW) * 345 Lot Rent * 60 (multiplier used for a 12 CAP rate and approximately 40% expense ratio due to low occupancy) = ~580K

I would then add a reasonable amount for each of the homes ready to go based on what you would sell them to a qualified tenant for. With the strong demand I would look for cash buyers ideally using CL, bandit signs, postlets, etc. If you can get 5-10K for each of these then would assign them each a value like that. For the purposes of this thread let’s just say 10K for each - which is 100K.

For the 35 trailers that need repair I would pay maybe 2-5K per home maximum. Let’s say 2K blended rate. You should argue some may need to be hauled off or thrown in a dumpster so that costs money and eats into the equation. 35 homes * 2K each = 70K

Get a good estimate to fix the major water leaks and other infrastructure repairs and bake that into price. If it costs 25K to fix those then subtract it from the price.

580K + 100K + 70K - 25K = 725K

One other thing. Considering the 45 or so Park Owned Homes (POH) I would ensure you have a provision in your addendum to motivate the Seller to provide the titles for them all using an offset. For each title Seller is unable to produce the title company shall reduce purchase price by 5K for each home in consideration for the effort and time it will take Buyer to obtain it. Something like that.

You can wiggle on the price a little for the individual homes if it you feel like you need to make the deal work, but at the end of the day this Park is only making like 60K per year and will require a lot of time and capital to turn it around.

Good luck.

1 Like

Nailed it. I agree. 12345

1 Like

Be careful. These numbers give about a 10 cap for the park, not 12. Expenses of 40% may be low with the large vacancy or right on at best, but only after the tenants pay the water/sewer. This will come out to about $55 per unit per month. If you use a lot rent after water and sewer then it is $290. $290 * 28 * 12 * 0.6 = $58.5k.

1 Like

This also doesn’t consider local market and intended to be high level. This would be a steal in Austin, TX, but probably not in Flint, MI.

thanks so much for the replies. Im right with you on valuation and hsschwar, your right, expenses will be very high.
We’ll go in low and see what happens.

1 Like