MHP Analysis - FL

I have come across a MHP that I believe has some potential. Let me know your thoughts on value, etc.- 55 lot family park - 38 tenant owned, 15 park-owned (vacant), 2 vacant lots- Estimated rehab per vacant MH is 7,500- 330 average lot rent, rents haven’t been raised in 3+ years; average lot rent in area is over 400. - near large metropolitan area- Park pays city water & sewer (rent includes everything except electricity)- Park is responsible for common areas, which I assume would mean paved streets. - Seller financing with 25% down (estimated 6% fixed @ 30 years); motivated seller- Mgmt states opex is 30%, but I assume it would be closer to 40% if not more. - Purchase price is 1mmWhat is the value of this park?

Seems like about +/- 900K at first glance if DD checks out. When you consider seller financing, a bit of value on the park owned homes, and the upside on the rent 1M doesn’t seem crazy. To me at least. Seems to me one issue would be making sure you can get to 80%+ occupancy. 

Thanks, GeorgeNiko. I valued it about the same. 3833012*.610 = ~900kUsing the 38330*60 =~ 750k; what is the difference between the two methods of valuation that I have seen on this forum? 

George,The main difference between *60 and *70 (which reflects the expense ratio) is whether the resident or the park pays for water and sewer.  The value of the park is closer to the $750k.  If the residents pay for water (which can run anywhere from $40 to $100 per month per resident), you will need to check the utility expenses of the owner carefully.  In my opinion, there is NO way that you can get expenses down to 30% when the park pays for water and sewer.Howard

George, I would agree with Howard concerning the Expenses:'In my opinion, there is NO way that you can get expenses down to 30% when the park pays for water and sewer.'Water and Sewer are a HUGE expense for a Mobile Home Park Owner.We wish you the very best!

I’ve been at the mobile home park convention in Chicago, so I’m just now seeing this question. I would value the park at 53 x $330 x 12 x .6 x 10 = $1,259,280 once you get all the vacant homes rented and occupied, less the cost of renovating, renting, and repairing the vacant homes (which is probably more like $200,000 to be safe) so, like everyone else, I’m thinking the value is right around $1 million. The upside in this deal, obviously, is raising the rents over time closer to $400. I’d definitely tie it up and do diligence on it, as it sound like a decent deal, pending due diligence.

Howard and Kristin, the lots*60 multiplier seems to more closely reflect a 12 cap not a 10 cap with a 40% expense ratio. So 330 x 38 x .6 (40% expense ratio since water is included) x 10 is about 900 plus some for the homes and upside.Shopping for my next park I’m going to be more picky, however, I agree with what I’ve heard Dave say a few times… I’m willing to pay up to about half of what the easily attained upside is. Perhaps I’m not a great shopper but it seems to me the city services, good market, stabilized turn-key park at a 10 cap is hard to come by right now. I know the name of the game is 10/20 but I’ll take 9/13 in a good market any day of the week. Way better than anything else out there, that’s for sure.    

Thanks for the comments everyone.