Value on Vacant Lots?

mobile home university
#1

I recently saw a MHP broker apply a $10K value on each vacant lot in a MHP for sale.

Is this reasonable and would an appraiser/lender agree with this valuation?

#2

It depends on the type of loan you need?

#3

If you listen to the boot camp, vacant lots get no value. But as deals get competitive, you may need to apply some value to win the deal. The real question is: what’s the lot worth once it’s full? If you purchase the vacant lot for $10k, and it’ll cost you $35k to put a home on it, is the lot worth at least $45k once a lot renter is paying rent? Hopefully it’s worth more so you can make a profit.

Alternatively, let’s say you pay $10k per lot and buy a home for $35k. You’re into it for $45k. Well if your tenant can go get a mortgage from 21st or another group, and you sell them the home for $35k (or more) you’re still into the lot for only $10k. This means you made a profit on your equity of $45k/$10k=4.5x equity multiple or $35k profit. That’s really strong if you ask any investor. I think you need to do the math on what the lot is actually worth and how much you can sell the home for, if any. It’s possible that in your market you buy homes for $35k but can only sell them to tenants for $15k, taking a loss on each home but a gain in value in your equity.

#4

JD, I am curious who you are buying homes through for 35k. Those were our pre-covid prices, but now we cannot find manufacturers selling single-wides for less than 40-45k.

BlueSkyParks, it really depends on many factors. What kind of loan? What value is being placed on filled lots? What are current rents in the park compared to its market? 10k may be completely fine if the price is right. Of course, to determine if the price is right you need to know whether the park will make you money now and in the future. I wish you the best of luck.

#5

I’m not buying homes for $35K. I am just using an example of how you might think through if you can put a value on vacant lots.

#6

Gotcha. You had me excited. I thought I was going to have access to homes for 10k cheaper.

Thanks for the clarification :slight_smile: