Help with Valuation of a park! --- my 1st!

Hello, this is only my second post on this forum so I appreciate the patience of the more seasoned investors. I am a very seasoned SFR and small MFR investor from California. I have been investing in both the SFR and smaller Multi properties for about 20 years with great success. About six months ago I decided I wanted to stop chasing deals constantly and starting switching to a buy and hold strategy and for tax reasons (yep CA can be extra tough) I researched MHP’s etc.

I elected to take F&D’s course in Denver earlier this year and I learned a lot and felt after liquidating a package of property out of state, I started doing some more in depth research of a target area I would like to start my MPH portfolio. I intend to (if all goes well) cluster my investments in one geographical area for ease of management and control even though it would limit my funnel of possible deals. I would like to purchase a park about once every 12-18 months.

I decided on a area in the mid west with a million plus metro area, great employment, low unemployment, high home valuations and rental rates … so after driving the area for a week and touring a ton of parks I located a with the following:

52 Spaces
Built around 1970
Mostly 35X70 sites
Paved streets and tenant parking (good condition)
7 Acres (with some possible room for expansion once stabilized)
Lot Rent 210.00 (Market is 235-250 with some cleanup)
63% Occupancy Rate currently
Out of state (OR) older owner who has let it deteriorate
City Water (sub metered) and City Sewer
Would consider it a working mans (2 Star) park.

Now … with all that considered I was VERY interested. Its located nicely with a Walmart about a mile away, military and lots of employment in the area.

One rub on this deal is that it comes with 22 POH’s of which 14 are occupied. Seller states that his yearly GROSS on the pads is 93,570 with an additional 51,800 off of the POH’s. Average POH with pad rent was about 475.00 so POH income per trailer was about 290.00.

All the trailers are single older ones from the late 70’s and 80’s. He feels they are worth 15K each and I would put that value around 8K.

Using what I was taught, I took the 210.0 X 32.76 (Current Occ Rate) X 12 = 82,555.20
Then with city sewer and water I took a exp ratio of 45% (could be + /- ) which = 45,405.36 X 10 for a park only valuation of $454K

Add in the POH’s at 8K X 22 =176K

Total as is valuation of 630K

I would truly appreciate everyone’s feedback. All of the homes are just on a rental month to month at this point. I have zero interest in keep them that way and would to convert them to rent to own asap. The last rental rate increase was about 10 months ago from 190.00 to the now 210.00

My other concern is financing. I can swing the entire park for cash if necessary and I am in discussion with the seller about possible owner carry, but would like feedback about the general difficulties of financing on a smaller park like this an my “lack” of prior park ownership!

I question the value of the park owned homes. I suggest you do more research on the retail value of homes in the area that are the same age (check CL). Then, convince the seller that he needs to sell them at a wholesale price (you can decide what that price is). Once you agree on a price, you’ll also need to physically inspect each home (use the data sheet provided in F and D’s materials to do your checks). If you visit the park have a contractor meet you to look at each home and determine repair costs and subtract this from the value of each home. I’d find out how long the renters have lived in the homes - and possibly ask the seller to ask the renters if they’d be interested in owning the homes or doing a rent to own.

I agree, you may trouble getting financing… mostly because of the amount of park owned homes/renters. It helps that you have SFR experience.

Everything is negotiable - show the seller that his homes valuation is off with actuals from CL and NADA.

Thanks for the feedback and suggestions!