F&D's formula for park with POHs

We are looking at a park on city water and sewer. The park pays for water. All the homes are POHs.

What formula should we use to determine the park value?

Is this the right formula… lot rent x number of lots x 12 x Y

Should Y be 6 or 5 or even lower?

Does the rental income from the homes not count for anything?



How many lots. My park I’m closing on has 29/36 lots at 175 lot rent. I will have to run it very tight to keep it at a 50% expense ratio until I get lot rents higher and a few more homes.

If it’s a smaller park and lower lot rent or has high vacancy then your number may be a 4 or a 5 but a 6 when you get it in order.

Need more info

The home rental income should not count towards the value of the Park.

If there is a trailer worth 5K that brings in a $200 lot rent and $300 home rent then this home brings in $3600 per year in revenue for the home rent component, minus 40% expenses is $2,160. At a 10 CAP that’s $21,600, which is a significantly overvalued home. This is why banks that lend on these a lot don’t give home rent value as part of their appraisals.

Your valuation should be based on the lot rents the Park generates + the sellable value of the homes. If they are a bunch of 80’s and 90’s homes then probably between 3-6K each. Inspect each and assign them a value based on repairs required and value when ready to sell.

F&D use a quick formula for valuing a Park on the fly - it’s Lot Rent x Pads x Multiplier. The multiplier should reflect the expected expense ratio. If it’s a large Park that you expect a 30’ish expense ratio then a 70 multiplier would be merited. Adjust it down for small Parks, Private utilities, or other recurring expenses that impact profitability. So a 20 Pad Park pulling $200 Lot rent with near a 40% expense ratio would be worth around 240K at a 12 CAP. Do a detailed analysis once you have their rent rolls and tax statements.