Aw c’mon John, no one REALLY saw you kick that puppy, DID they?!
I just thot it was a turbo-pup.
Rick
Terry, If you are looking for some one with more money than brains you are in the wrong place. I respect John Hyre and his opinions. John asked for information from you that you do not seem willing to give. I do know that John is a Tax Attorney and a Real Estate Investor and will call a spade a spade in a heartbeat. I don’t know of any investors that will buy used mobile homes for the price you are asking. You may not like everything you hear but you will get honest opinions on this site. If you really want a REAL valuation of your park, give up the information that is requested.
By the way, I might believe that John kicked the puppy if its dog tag said something like “revenooer” or “IRS”!!
Rich Wright
Terry,
I don’t see how you can say John “shot the whole deal down”. This forum was built to create an environment where people could learn and hopefully make more money in the mobile home investing niche. John was simply telling you that the price you placed on the park didn’t make sense when compared to the NOI, number of lots and number of park-owned homes. He was trying to help you establish a value that would be marketable.
You didn’t state what the market lot rental rate is in your area, but for discussion purpose, let’s say it’s $200 per month. I would place a value of $12K per lot in your park. This is for the dirt only. So, the land value is a total of $228K.
I would then add the value of the MH’s to the land to come up with a final value. 1998 MH’s can be bought, delivered and setup for less than $10K in most parts of the Southeast, so let’s assign a value of $10K per MH. The total value of the MH’s is $190K.
These two variables added together come up with a total value of $418K MINUS deferred maintenance or repairs.
This is just one method of placing value on a MHP. Now, let’s look at the park on a cap-rate basis. Daphne is absolutely correct, most MHPs run between 30-40% operating expenses. Pure rental mobile home parks often run close to 50%, due to the many repairs needed on the mobile homes.
Let’s say that your park runs at 40% operating expenses. With $114K gross income, that puts the real NOI at $68,400. IF you could get someone to pay a 12 cap rate for a rental mobile home park, the cap rate based value would be $570K.
So, your park is worth somewhere between $418-570K. I hope this helps you see what is involved in placing value on a MHP.
Steve
John is on the right train of thinking.
I try to keep things very simple, especially during the pre-due diligence stage because I look at so many deals. I use what is termed “the 60 to 1 rule”. If you take the monthly lot rent of an occupied lot and multiply it by 60, you will come up with a number that each lot is worth.
This number represents somewhere between a 12%-14% cap rate, depending on the monthly operating expenses of a park. If the asking price of the park fits somewhere close to this rule, I will pursue the deal.
Steve