Park Evaluation - Expenses

I’m developing a projections spreadsheet for a park I’m interested in. As a conservative estimate, I automatically estimate a 40% expense ratio for a park.

Here is my question: Do I apply that 40 percent only to the lot rental revenues, or to the total revenues generated by the park (rentals, lease/options, etc.)?

I’m thinking to the gross revenues as rental properties will require more maintenance, but on the lease/options I’m not sure this formula would work.

I’m trying to create a standard spreadsheet so that I can evaluate the properties I like going forward. The equity increase will depend on the NOI and therefore I’m trying to make sure my formula works for all parks, whether they have rentals or not.

Thanks for any input.

Rick G., CA


Most of the expenses associated with a MHP are fixed. The actual percentage of operating expenses goes down as the park fills up. The key expenses that are going to be the highest are:

  1. Property taxes

  2. Insurance

  3. Payroll (Manager and Maintenance)

  4. Utilities

A good rule of thumb for a turnkey park (80% occupied or higher) is about 35 percent. On the income side, this includes lot rent and late fees only.

You definitely don’t want to add in lease/option or mobile home rental income into the total gross income. I usually only pay wholesale value for the mobile homes that come with a MHP purchase. One other way that works is to use only 10 months of rental income on the homes and apply half of that to expenses and then value the homes at around a 15 CAP rate and finally subtract any repairs that need to be made.

Another good rule of thumb is to buy a park that will be at least breakeven or better once you have it 50% occupied.

Steve Case

Thanks Steve,

You just don’t take a break do you? :slight_smile: I would still be taking a little break if I had to wait 8 hours at the airport for the next available flight!!!

I got most of that at the boot camp. I’m sure I didn’t explain myself well. In developing the projections for my business plan, I’m trying to figure out how to value the equity on the property as time passes. For the purposes of my business plan I want to only count the equity value that can come by way of a refinance.

So, to that end, if the banks only loan you money on the dirt, then I would assume that I would keep the lease/option properties completely off of my calculation (except for the lot rent).

The rentals is where I get a little confused. Again, I would only count the lot rent towards the income. I know the bank will not loan on the rental income, but you still have expenses that are tied in to the rentals. That would affect the NOI.

So, to simplify my question, do I only include the lot rent income into my calculations for bankable equity? My report would therefore ignore the rental income and lease/option incomes…correct?

I guess I got myself in trouble when I tried using a blanket expense percentage as a rule instead of specifically looking at expenses. But sometimes when doing preliminary reviews of properties the income statements are rather incomplete and lacking any detail. My goal was to create a simple spreadsheet to let me visualize a business plan going forward for 5 years or so and see if the risk/reward is worth it.

Thanks for the help.


You’ve got it right…a studious and quick learner :slight_smile:

Using a 35-40% operating expense ratio on the lot rents only is a conservative approach and will work on determining loanable equity.


P.S. I’m flying my own plane into San Angelo from now on…don’t have to worry about airline screw ups.

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