Am considering a park with a couple dozen homes on a rent credit program. What are your thoughts on valuing the payments and homes?
Rent credit homes are obviously considered POH. so don’t cap the additional rent on those, only the lot rent. Value park based on typical NOI approach using lot rental income only and then add the estimated remaining rent credit balances owed on top of that
I would value the agreement by taking the total payments that are left minus the expenses. Typically, the park owner is still paying the taxes and insurance on the home. So, if you 30 payments at $400 per month left, it would be $12,000 minus 2.5 years of taxes and insurance.
If that value is less than the value of the home, I’d use that value. If not, I’d use the underlying value of the collateral. Value and price are two separate things. Not suggesting you price there but that’s how I’d value it.
Thanks for the responses and I fully agree with your analysis. Although I’m an experienced multiple park owner, I haven’t bought a park in a bit and wanted to make sure I wasn’t overooking the basics.
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Same here. I’m running into the same thing with operations related costs. I’ve done them before but its been a few years.