I have taken your home study course and I am in the process of making an offer on a Mobile Home Park. I would like to get your advice on a proposed offer for a mobile home park.
The park has 20 mobile homes. The average rent rate is $400 / month / unit.The park comes with extra undeveloped acres of land for expansion and is located on a major highway. The mobile homes are on septic systems and the water supply is from wells. City water and sewer is not available near the park at this time.
The park is located in a rural town. There are larger towns within 5 miles of the park. A Walmart and numerous restaurants and small shops are within 5 miles of the property. However, larger towns are within 30 to 40 miles of the park.
Can you provide me with some guidance on how much you would offer for the mobile home park?
Thanks
OK, let’s break this down into pieces. The value of the park is 20 (occupied lots ) x $[lot rent] x 12 x [net of expense ratio] then valued on a given cap rate. The first fact you need is the lot rent. I know the units rent for $400, but what is the lot rent? Find that out and then I’ll give you the next step.
The units are park own homes. The rent is for the units themselves. Lot rent is $0
I understand that, but I’ve got to have the prevailing lot rent in the area. Call all the parks nearby and get their lot rent, as well what it includes (water/sewer/trash, etc.).
The lot rental rates in the area are around $150 / month .
I’d say the value is roughly [20 x $150 x 12 x .6 = $21,600] [at a 12% cap rate] = $180,000 plus the value of the 20 homes (maybe $1,000 to $5,000 each?).
Even at a 12% cap rate, I would not be too excited because of the private water and sewer, but it would get you in the right zone if the deal is attractive to you.