The “rule of thumb” for expenses is 40 to 45% gross income. I’m interested in what you all are seeing in actual expenses today. With parks aging, inflation, etc. Do you include taxes and Interest?
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I target older, smaller parks in PA (less than 40 lots). Due to high taxes, high water costs, and many being private utilities, I generally see 45%-50%. I include taxes in this number but interest is not included in operating expenses and so it is ‘below the line.’
How is PA as it relates to landlord laws and regulations? I’m currently in NY and just starting to poke around and complete my research. I would be looking for a friendlier state for MH parks.
It really depends on the property and your operation. That rough ratio is for Operating Expenses. Interest is not an operating expense. An income statement has Revenues minus Operating Expenses to get Net Operating Income (NOI). Then you subtract Non-Operating Expenses to get Net Income (NI).
It does not make sense to include interest because the same park bought for all cash versus financing would have exactly the same operating performance (e.g. same NOI), but obviously the net income would be different.