Evaluating numbers on parks

Great wealth of knowledge on this site. Looking at getting 1st property, and the parks i ave been running numbers on doesn’t seem like they are positive cash flowing. My question is: are a lot of the parks out there right now priced wrong, or am I missing something when running my evaluations. I have one park I’m looking at right now, wondering if any seasoned investor would look at number with me offline? Any help would be great

Where are you looking predominantly?

Most parks you see listed online are overpriced and barely cash flowing after debt. Those deals don’t make sense for most investors. Never overpay. Could it make sense in a 1031 scenario? Possibly.

So how do you get deals to work?

You wait until those public deals come down to earth on pricing because they sit and sit and…sit. Or alternatively, you try to find your own deals off market. Or you develop great relationships with brokers and they’ll send you pocket listings. All these strategies require time, effort and money.

Most deals I’ve seen publicly over the past 2-3 years have been drunk on pricing because of cheap debt (3 years ago) and more people getting into the space.

Also, the rise of institutional investing and syndications has driven cap rates down over the past several years…their sole job is to deploy a pool of cash, contributing further to the “problem.”

The market is taking a turn with more realistic pricing gradually…but majority are still overpriced.

Everyone has different goals as well, a 5 cap may make sense for person X but not person Y. There’s always some nuance in decision making.

Numbers are numbers and they don’t lie! How can you pay a 5, 6 or 7 cap when interest is at 8-8.5%? The key is patience, controlling emotions and logic.

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Many parks are priced on a future proforma that is unrealistic plus why not the present owner do such and then sell. The present market has to MANY buyers compared to sellers thus the push to take a class and get rich. Many parks are unpriced–which is a crude—give us a clue to an expected sales price. Many parties to the buying table are ONLY interested in profits and little concern to the residents or to the locale community. How many parks does one need to own to be content—the price point show greed from seller and if we list one of our parks it will be sold based on FUTURE inflation. We are investing at this point in RV parks since there is still usually a 9-10 cap PLUS sites are FILLED with new RV’s brought in by the new residents. In some ways MHP’s are a dying enterprise in particular when a new apartment building is next door and the park is full of OLD homes or lots of Motel 6 rentals… The buyer needs to have some experience as what justifies a good deal—in the mean time WORK at a park as a manager or work with a seasoned owner-operator. Taking a class is much different than a hands on experience with a real operation.

Please post some basic criteria, and somebody may provide some guidance.

Also be wary of what you read. For example, Jferrari427 seems to be accurate, but I believe Carl is a bit ignorant as to how larger investors work. Just because he doesn’t understand them doesn’t mean they are greedy, should put an asking price, are overpaying, or their strategy is flawed. Everyone has an investment thesis and they are often not the same.

For example you may want 10% cash flow, but I may want minimal cash flow because I am investing in a tax hedge.

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mPark thanks for calling me ignorant—Brillant. Before your time George Allen was the example and presently take your pick of who is being greedy and why. The new buyers with little funding will have a difficult entering the park business which was not the situation 15 years ago. How many parks do I need to own personally to be a large investor—maybe 10 or more–I have been there and have since diversified into RV parks, farms, and DG stores as to where the best value is. So mpark how many parks do you need to own to be content—another area to contemplate. We are here to be HELPFUL TO EACH OTHER, thanks.

Carl, I did not call YOU ignorant, but I believe some of your verbiage on your post does closely follow the Merriam-Webster definition of that word. Additionally, I believe you are offending people on this forum when you say things that show a lack of knowledge of their business approach which is different than yours.

In particular you said the following which can be argued to be ignorant phrases…

Your Quote: “why not the present owner do such and then sell.”

My response: If you fully capture all value-add, then the next investor won’t have any value-add to capture. Many investors need to grow into their valuation, and by taking away the value add by capturing it yourself, you limit their ability to pay the asking price, so they won’t bid.

Your Quote: “Many parks are unpriced – which is crude.”

My response: Calling this process crude shows lack of understanding of business models other than your own. Some parks are unpriced because the owner does not know the true value. If they set a value, they may be undersetting that value. Thus, but going to market unpriced, they are allowing the market to set the price. Those experienced in underwriting deals will develop a fair price which may or may not meet the seller’s expectations. If expectations are met, the deal closes. This is very fair, standard practice, and definably not crude.

Your quote: “how many parks does one need to own to be content”

My response: What difference does it make to you if a person owns 0 or 10 or 100 parks? Because somebody owns more or less than you, they should be negatively judged?

Your quote: “the price point shows greed from the seller”

My response: The market will bear what it will bear. Sellers wanting a high price is not showing greed. Personally, I was approached by a broker in the past and they told me if you don’t really want to sell, set a high price. If somebody takes it, then you can decide to sell. I didn’t list the property, but the point is that a high price does not mean greed. Also, there are fund managers with investors and the investors have input on a minimum selling price, even if unrealistic. Either way, a high price does not always mean a person is greedy.

I am not sure who George Allen is but I assume by you relating me to him, you are insulting me. I never insulted you. I am not here to be unhelpful to you, and I am not here to criticize your investments. I only pointed out that your lack of understanding of a side of the business which is different than yours causing you to call those people crude or greedy can be perceived by others (including me) to be offensive, and I think you should consider that some of us feel differently than you. Maybe that is why you quit the business and got involved in DG stores and farms and others didn’t.

Is there an average number per pad to determine a ballpark asking price? Assume the park is 95%+ occupied and has public water and sewer. Also new ductile water lines, new tenant services, new tenant curb valves, new park isolation valves, new pressure reducing valve, new main shutoff’s, and new paved roads. Park is centrally located close to shopping gas stations and the highway.

I’m interested in this park.

There is an average number per pad but you have to get and analyze the numbers on the park to determine it. If the park is for sale ask the owner for the data and do your analysis. If you haven’t bought a park yet, take the MHU Bootcamp before you do - you’ll learn most everything you need to know to buy and operate a park.

We are in the park business. We try to vary our investments to where the most ROI occurs—presently in RV parks which is also given space by Frank R. and appreciate their efforts to let us give our experiences and knowledge to others. There are many factors to view when evaluating the numbers on parks. When a once full park 30 years later is maybe half full and has POH and lots of empty lots----need to figure out the problems. Case in point; lots of parks in certain states (for sale on the park store) once had a waiting list, are there NEW apartments nearby? The general population is very mobile. and being tied to a mobile home—times are changing. We enjoy new residents bring in new RV units and some over $125,000. Just our observations from being in both areas of the business. Just like the payment methods for rent that has completely changed.

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Still looking to get my 1st MHP. Looking at one that has 19 lots: 9 POH, 6TOH, assuming other 4 lots are empty. Asking price is $390. All utilities are paid by tenants including grass. City water and sewer. POH @ $450, TOH @ $150. Insurance $5k annually and repairs $8k. Still don’t have taxes yet. Here is my thought is use my HELOC for the down payment, and convert the POH to TOH. Where I’m confused is once I raise lot rent and convert to all TOH, I don’t see how there will be enough to pay mortgage, HELOC and expenses. Unless I’m only paying interest on the HELOC, then refinancing in 2-3 years? I listen to all kinds of podcasts and read a ton of books, but still have not wrapped my head around the specific numbers when working a deal. Any advice, or resources you can recommend. I am not looking to flip properties, looking for long term

@acbs38 What’s lot rent in the area and what (if any) state or local regulations stand in your way of getting to that lot rent? $150 is insanely low anywhere. What can you sell the POHs for— are they 1960s 10x40s or something you could actually work with?
Could be a good deal if you’re able to get up to say 19 TOHs at $300-350/mo even, which isn’t crazy in most places.

@acbs38 Chris,
That park sounds almost identical to my very first park that I got 20 years ago. Numbers are almost identical. Anyway you may want to consider hanging on to the POH rentals while you get the park paid off. Leaving them as rentals (with a 40% repair expense estimate) you bring in an extra $1620 over them being TOHs. That will keep you hopefully on the right side of the road with cash flow. It will buy you some time to get your park owner ‘sea legs’ under you and make some strategic small step pad/rent increases. Get the HELOC paid off and then reassess the situation.

I know there is a general rule of thumb is to avoid POH rentals but if the market conditions are right you can do ok with ROI. POH maintenance is always a concern but if you live near the park, have the time and a little experience you can handle yourself or find a competant local handyman and pay them well to be your go-to person. Think about long term RV s for the empty spaces. Just need to convert the power.

Sounds like an interesting park. Would be curious what the rents are in the area.

Appreciate the insight. When looking at parks is there a formula you use to see if it’s priced accordingly or what you should offer. I have read/heard that POH should not be considered of value when evaluating the park, do you agree?

The closest other park is about 45 away. There are a few apartment complexes in the town… Big manufacturing plant right across the street from this park. How do I evaluate the numbers to see if asking price is good?

That is incorrect to not consider POH value when valuing the property. The mistake is that people capitalize the POH rent. POH rent should not be capitalized because it is not indefinite.

The proper way to do it is to value the POH home as a one time sale price. For example, a $10,000 home should be valued at $10,000 not a price based on its cash flow.

Yes there is a formula and it is called a discounted cash flow model. It is actually a series of scores if not hundreds of formulae built into a spreadsheet model. You should be running a discounted cash flow model on each potential acquisition.

Simple metrics like cap rate, price per pad, etc, only provide a rough estimate.

Thanks for the intel, where would I find a model of a Discounted Cash flow spreadsheet?