I have a question regarding the value of completed pads, as in vacant concrete pads that are set up for utilities. When a seller adds value to the price of those “completed” pads to the overall price of the property, is that a legitimate consideration? While I know vacant land in itself is of little value if it isn’t set up for MHP’s, these appear to be properly zoned and apparently only need the MH itself.
From a lender perspective, is there an appraised value on these?
As always, I appreciate any insight or advice! Thank you.
An appraisal will generally use the income approach when valuing an MHP. That being said they will also look at recent sales comparables to get to an appropriate capitalization rate.
Do Vacant pads have value? Yes.
A simple way to figure it out is to take the value of a Pad with an MH on it and subtract the time, effort, and cost to fill that space. A space in CA will cost more to fill than a space in AZ, but the home will also sell for more.
You can also use the Cost approach. IE how much would it cost me to do the improvements?
I like to use the SDGuy approach. $10K per empty site. So far that has worked out pretty well for me. LOL…
The short answer is most any sophisticated investors that I know give them zero value. If you’re in a strong market with very little pad vacancy and high lot rents, then you can make the case that the vacant pads are worth something because of scarcity and the high potential value of getting them filled, but even then I would say the value would be minimal. Most appraisals I’ve seen do not give them value. But some appraisals might give some value to the improvements if they feel like the market warranted it. If you provided a bunch of receipts and before/after pictures showing all the improvements you made, that would help make it easier to try and convince an appraiser they had at least some value, but I wouldn’t count on it. My 2 cents.
If I were a seller and had a couple empty pads that had functioning utilities (ie just a home is needed) and was located in a strong market with little vacancy then I’d definitely want to be paid for them. Idk what lenders would go for, but I’d make the argument that they are worth whatever it costs to build a new one. If it’s $30k to build a new pad in an existing park then the lot should be worth $30k. Basically whatever the “replacement” value would be.