For a park with mostly POHs, is the valuation still based on land rent or is the entire rent roll taken into consideration such as with an apartment building?
Thank you
Depends on who you ask. Most here would tell you it is on the pad rent only but also depends on a lot of other variables not the least of which is the potential NOI on the POH homes and how engaged you want to be with the maintenance. Opinions vary…
Thanks for your response
Banks generally value lot rent only! So you should as well. The problem is - if you’re valuing strictly lot rent you’ll likely do very few deals- if any.
The reality is most sellers will capitalize POH rent/rental income. What you can do to find a middle ground is - don’t capitalize the POH income, but maybe add back 70% of the annual POH rent to the purchase price.
Opinions may vary on this topic, just don’t overpay.
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