I’m looking at a park that is 98 lots and has 81 tenants (all tenant owned). The average lot rent is around $325 and the market is probably more like $425-$450. It was city water/sewer direct billed and is a decent looking park aesthetically and is in a good market and has a good location in that market.
How would you guys value this? The owner wants $4.5m and it feels a little high but am i crazy to be considering $4m here?
I would need to see the entire P/L to give a solid recommendation, but 4 million for the limited description you provided sounds like an excellent deal.
Bottom line: does it cash flow after all expenses including mortgage?
If so, you have 18 lots to in fill which will increase income, as well as, increasing rents to market.
If I was aware of this deal. I would become your competition 
Thanks for the feedback. The deal I’m looking at is “something like those numbers.” TheSteve does not like a ton of competition on a deal!
| Paying Units | Rent | Monthly | Expense % | Expense $$ | Monthly NOI | Annual NOI |
|---|---|---|---|---|---|---|
| 81 | $325.00 | $26,325.00 | 35 | $9,213.75 | $17,111.25 | $205,335.00 |
| 81 | $325.00 | $26,325.00 | 45 | $11,846.25 | $14,478.75 | $173,745.00 |
| 81 | $325.00 | $26,325.00 | 55 | $14,478.75 | $11,846.25 | $142,155.00 |
| NOI | CAP | Value | Value of Vacant Units | |||
| $205,335.00 | 6% | $3,422,250.00 | $180,000.00 | $3,602,250.00 | ||
| $205,335.00 | 7% | $2,933,357.14 | $180,000.00 | |||
| $205,335.00 | 8% | $2,566,687.50 | $180,000.00 | |||
| NOI | CAP | Value | ||||
| $173,745.00 | 6% | $2,895,750.00 | $180,000.00 | |||
| $173,745.00 | 7% | $2,482,071.43 | $180,000.00 | |||
| $173,745.00 | 8% | $2,171,812.50 | $180,000.00 | |||
| NOI | CAP | Value | ||||
| $142,155.00 | 6% | $2,369,250.00 | $180,000.00 | |||
| $142,155.00 | 7% | $2,030,785.71 | $180,000.00 | |||
| $142,155.00 | 8% | $1,776,937.50 | $180,000.00 | $1,956,937.50 | ||
| Value Range | ||||||
| $1,950,000 to $3,600,000 |
| Paying Units | Rent | Monthly | Expense % | Expense $$ | Monthly NOI | Annual NOI |
|---|---|---|---|---|---|---|
| 81 | $425.00 | $34,425.00 | 35 | $12,048.75 | $22,376.25 | $268,515.00 |
| 81 | $425.00 | $34,425.00 | 45 | $15,491.25 | $18,933.75 | $227,205.00 |
| 81 | $425.00 | $34,425.00 | 55 | $18,933.75 | $15,491.25 | $185,895.00 |
| NOI | CAP | Value | Value of Vacant Units | |||
| $268,515.00 | 6% | $4,475,250.00 | $180,000.00 | $4,655,250.00 | ||
| $268,515.00 | 7% | $3,835,928.57 | $180,000.00 | |||
| $268,515.00 | 8% | $3,356,437.50 | $180,000.00 | |||
| NOI | CAP | Value | ||||
| $227,205.00 | 6% | $3,786,750.00 | $180,000.00 | |||
| $227,205.00 | 7% | $3,245,785.71 | $180,000.00 | |||
| $227,205.00 | 8% | $2,840,062.50 | $180,000.00 | |||
| NOI | CAP | Value | ||||
| $185,895.00 | 6% | $3,098,250.00 | $180,000.00 | |||
| $185,895.00 | 7% | $2,655,642.86 | $180,000.00 | |||
| $185,895.00 | 8% | $2,323,687.50 | $180,000.00 | $2,503,687.50 | ||
| Value Range | ||||||
| $2,503,687.50 | to | $4,655,250.00 |
If Full and Rents at $425.00
| Paying Units | Rent | Monthly | Expense % | Expense $$ | Monthly NOI | Annual NOI |
|---|---|---|---|---|---|---|
| 98 | $425.00 | $41,650.00 | 35 | $14,577.50 | $27,072.50 | $324,870.00 |
| 98 | $425.00 | $41,650.00 | 45 | $18,742.50 | $22,907.50 | $274,890.00 |
| 98 | $425.00 | $41,650.00 | 55 | $22,907.50 | $18,742.50 | $224,910.00 |
| NOI | CAP | Value | Value of Vacant Units | |||
| $324,870.00 | 6% | $5,414,500.00 | $180,000.00 | $5,594,500.00 | ||
| $324,870.00 | 7% | $4,641,000.00 | $180,000.00 | |||
| $324,870.00 | 8% | $4,060,875.00 | $180,000.00 | |||
| NOI | CAP | Value | ||||
| $274,890.00 | 6% | $4,581,500.00 | $180,000.00 | |||
| $274,890.00 | 7% | $3,927,000.00 | $180,000.00 | |||
| $274,890.00 | 8% | $3,436,125.00 | $180,000.00 | |||
| NOI | CAP | Value | ||||
| $224,910.00 | 6% | $3,748,500.00 | $180,000.00 | |||
| $224,910.00 | 7% | $3,213,000.00 | $180,000.00 | |||
| $224,910.00 | 8% | $2,811,375.00 | $180,000.00 | $2,991,375.00 | ||
| Value Range | ||||||
| $2,991,375.00 | to | $5,594,500.00 |
Thanks! It feels worthwhile with the potential value created through the upside. It’s also a market where if rates remain high with inflation, I think the market will support rent growth of at least the national inflation reading.
The recent rate environment makes pricing more tricky but I know I’d be all about this deal if rates were around 5.5-6% or under.
Very detailed spreadsheet, how do i get a copy of one of those?
Here you go.
Thanks for the spreadsheet. Im sure Im over thinking this, but where is the $180k value of vacant unit coming from?
“I’m looking at a park that is 98 lots and has 81 tenants (all tenant owned)”
17 Vacant pads.
The $180K came from an estimated $10k per vacant pad. It looks like I made a mistake and used 18 Vacant pads in my calculations. 18 x $10K. Oops.
You can adjust that number to suit your locale. IE Vacant Pad in CA is worth more than a Vacant Pad in Bangor ME.
I realize this is late and you probably already moved on purchasing or passing on the property, but I’d love to learn what happened. Especially in light of what MHU teaches. Given your numbers, unless I’m wrong, Frank would value this at $2,211,300 (81 x $325 = $26,325 x 12 = $315,900 x .7 = $221,130 x 10).
Nothing happened with it ultimately but Frank doesn’t buy at a 10% Cap Rate anymore. Not sure why they are still teaching that. Now is a good time to sell parks because there is virtually no spread between the rate i can get from the bank and cap rate I can sell at. Institutional capital has saturated this industry and I’m unloading into that now.
We’re also entering a rising rate environment long-term. It’s a much different headwind than anyone on here has bought in unless they are in their 70’s or 80’s. I don’t think real estate has a great decade ahead of it. Definitely not going to be like the last decade where you could suck and still make a fortune.
I’d back into it from actual income, not ‘potential’ rent - easy to say you’ll raise to $450, harder to actually do it without turnover headaches.
We’re now starting to see the backside of the plan as institutional capital plan as larger and larger parks are coming back on to the market at maxed out rents, marginal caps and elevated prices. Cashing out.
We got started and used leverage at 14% then 10% l. Deals that made sense were few and far between. Made buying at 6% golden and bought everything we could at 4%
And refinanced w cash out sub 4%. It has creeped back up to 6%. Can’t say we’d use leverage again above 7%, but who knows. Some times deals fall in your lap…
Can still borrow in Europe at great rates.