I’m selling my park located in Cheney, KS. The park is 34 lots and approximately 5.5 acres. There are 32 lots with homes on them. There are 27 paying lots, 2 lots with homes that are abandoned and need to be removed, two lots with mid 90’s 3 bdrm 2 bath that I’ve recently brought in that need refurbished and one lot that my manager lives on that I give to her rent free. I’ve owned the park for two years and have removed one home and have demolished another. Lot rent is $180 per month and that includes water, sewer, and trash. Rent was last raised $5 in November of 2013 right before I bought it, comparibles are $235-265. Park is on city water and sewer and roads are city owned. Park comes with a wood framed storage shed with a full unfinished basement used as a storm shelter and three metal quonset huts. Asking price is $400k. Please direct all questions to comptonenterprisesllc@gmail.com.
Bumping this up to the top.
You can keep bumping it up to the top, but the reason you have not had responses is that you are asking about twice what the park is worth. Good luck.
Increase your rents to $250 then come back in a year and try again.
29 (I’m assuming you can get tenants in the two newer homes ASAP) x $180 x 12 x .6 x 10 = $375,840 so I don’t think your price of $400,000 is really that far off. I would think you would get pretty good response to this park on Mobilehomeparkstore.com. But, at the same time, I think you definitely should raise the rents higher before you sell it, as that’s the easiest part of the turn around.
Frank,
I don’t believe that you can use the formula here without adjustment since the utilities comprise such a large percentage of the rent. The W/S/T will be at least $60 per month and could be as high as $100 (assume $60). If the residents paid $120 per month lot rent and paid the utilities to the municipality, the formula would be 27 x $120 x 12 x .7 x 10 or $ 272k. I would not give significantly higher value to the homes that need to be renovated and gain a resident if the new owner is going to do the heavy lifting. A higher valuation might be warranted once the rents are increased and the residents stick around. A purchaser would rightly ask why the current owner did not raise the rents if they were way under market. A new owner will incur some aggravation is raising the rents and will want to be compensated for this (and not give the valuation to the seller). I stand by my original statement that this park is significantly overpriced.
Howard
Did I miss something in the post, because I see no mention of actual water/sewer cost per lot? The standard formula for any park is an expense ratio of 30% if the tenant pays their own water & sewer and 40% if the park pays it (assuming water and sewer is municipal and not private). Assuming a $180 lot rent, that would provide roughly $20 per month per lot (that 10% difference), which would be fine if the tenants are not abusing water. However, our formula was designed for lot rents in the $275 range (which is our average), which gives you a more realistic number of a little under $30 per month, which works fine on most parks. Regardless, I used as a margin for error 1) the manager’s lot rent (which should be used in the revenue calculation) 2) the fact that the rents are significantly undermarket and 3) the roads are city owned and that reduces the perceived cost of perpetual road repair (which is considerable). The buyer may also find that the two homes destined to be trashed might be saved, which would give you two more lot rents.
I agree that any buyer would ask why the rents have not been more aggressively raised – that’s why I suggested that the current owner do the raising before they sell.
I’m not vouching for this deal in any way – I’ve never seen it – but the numbers do not look like they warrant being tossed aside. Asking prices are seldom firm in this industry, and there’s material to work with here. This is the kind of deal that we tie up at a good price and do due diligence on to test our assumptions. It’s too small a number of lots for us (our average park these days is around 100), but it might work for someone looking or a Kansas park. That’s up to the buyer.
I do not disagree with using the formula as a “starting point.” However, this needs to be modified with lower lot rent parks since the costs for water, A/C repairs, and most other items (except taxes, insurance, and manager) is the same for a $350/month park and the $180/month park in the same community.
The lower rent park usually has older homes which waste more water. I am not convinced that a realistic number for water is under $30/month for an older park.
One of the reasons a purchaser wants to see the rent increase prior to purchase (and some time to see the effect) is to determine whether the increase caused move-outs and abandonment of homes. This is especially important in a park with old homes that may need to be trashed if the resident walks away.
The seller states that he removed one home, trashed another, and has two abandoned homes that need to be removed. This suggests that if the current residents cannot afford the rent increase to “market” they will abandon the home which may need to be trashed.
This is a fascinating business with many moving parts and considerations. I value the posts whether I agree with them or not. Almost all the posters are trying to be helpful or requesting help (which is usually forthcoming).
I agree with Frank in most things and I hope the slight difference in point of view in this matter will be helpful. As far as this particular sale, perhaps Brandt can post the address so we can look at the park via Google Earth and compare it to the comps.
To be fair I only bumped it to the top once. The reason I have not had responses here is because I asked everyone to respond via email. I don’t check this everyday that is why I haven’t responded to anyone here. The address is 915 Filmore, Cheney, KS. Thanks