I’m looking at a deal in the Southeast, metro population of 145,000, which has grown at a rate of over 11% in last 15 years. There are 84 lots, 72 occupied with an average lot rent of $185. Water/sewer on public, but submetered to the lots. Eighty POH’s are part of the deal. The broker indicates all POH’s are on a rent to own program, with the total balance owed on the eighty homes being $987,989. How best to calculate value? Here is how I have done it:
72 x 185 x 70 = $932,400; or should the multiple be 60 since water/sewer are submetered, in which case: 72 x 185 x 60 = $799,200.
The tricky part is the value of the homes. I believe Frank suggests placing a value of 65% to 70% on the balance owed on the homes, which would be $987,989 x .65 = $642,193.
What am I missing? Thoughts and advice would be much appreciated.