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Updated over 2 years ago on . Most recent reply

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Hiren Patani
  • Investor
  • Houston, TX
10
Votes |
50
Posts

How much to pay for a RV park or a mobile home park?

Hiren Patani
  • Investor
  • Houston, TX
Posted

Hello,

I would like to know whether seller's asking price is a fair price ( not over asking) for a running RV park or a mobile home park? What should be my break even point? Should one pay 2X or 3X or something else of Gross income? Please advice. TIA for your help.

  • Hiren Patani
  • Most Popular Reply

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    Frank Rolfe#1 Mobile Home Park Investing Contributor
    • Real Estate Investor
    • Ste. Genevieve, MO
    942
    Votes |
    363
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    Frank Rolfe#1 Mobile Home Park Investing Contributor
    • Real Estate Investor
    • Ste. Genevieve, MO
    Replied

    The standard rule is that the operating expense of a mobile home park is 30% if the tenants pay their own water and sewer and 40% if the park does. But if the park is less than 20 lots, you are safer at increasing that expense ratio to 40% and 50% respectively. So all you do is take the total number of occupied lots times the lot rent time either 50%, 60% or 70% to get the net income. You divide this number by the asking price and that gives you the cap rate. Most mobile home park buyers want to pay a cap rate that is around 3 points higher than the interest rate on the loan. That can get you a 20% cash-on-cash return.

    RV parks are treated differently. The bank will want to see the last three year's P&Ls and tax returns from the seller, and then will average them and count that as the net income. RV parks are typically priced at two points higher cap rate than mobile home parks because they have more risk since customers can freely move out (mobile homes cost around $5,000 to move by comparison).

    There are about 1001 additional items you need to know, but that will get you started.

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