First Time Deal Analysis

I am interested in this park:  36 lots (35 occupied), lot rent only, lot rent = $175 per month, master metered water from the county, park on septic (county sewer about a mile from park), tenant pays electicity, park pays trash, park roads are private.  The park is located in a growing city within the Southeast.  The town’s population is about 88,000 with a metro area of close to 190,000.Using Frank’s basic valuation method:  35 x $175 x 60 = $367,500                                                               35 x $175 x 70 = $428,750I am not sure if the expenses will be closer to 40 or 30 percent given that park is on septic, but water is master metered.  I am opting for 40 percent.  I also calculated value based on NOI of $41,895.  I arrived at that NOI by 35 x $175 x 12 = $73,500, minus collection expense of 5 percent ($3675) = $69,825 Effective Income.                                                                $69,825 minus expenses of 40 % ($27,930) = $41,895                                                                At a cap rate of 10%, value = $418,950; at 12% cap rate = $349,125Any advice the forum could offer on how this park should be valued would be greatly appreciated.  If purchased, this would be my first park.  Also, since the broker says seller financing is not an option, I will have to turn to a local community bank for financing.  Any reasonable guess as to the interest rate available with a downpayment of 25 to 30 percent?  Thanks in advance.RL

Your expense load will be closer to 40%, so use the 60x multiplier.You’ll likely be able to get a local bank to finance you 75% LTV, 5.25% interest, 5 years fixed, 20-year amortization.I’d go for the lower valuation.  This is a smaller park, and they trade a lower prices (e.g. 12% caps).Good luck,-jl- 

Hey Jefferson.  Thank you for your response and for the information contained within.