Valuations of On-Market vs. Off Market Mobile Home Communities

[Logan M.]

I have been amazed by how much community owners will ask for parks that are posted for sale.

We had a community for sale in Orem Utah, about 200 spaces asking $40,000,000.

It is not unusual to see Parks that are right in the middle of the city asking $100,000 per space but that would mean CAP rates are down to the sub 5's. In more Rural markets it is not unusual to be between $20,000-$40,000 per space, with a CAP closer to 10%.

My point of this is to show the disparity of on and off-market communities and when you get to a certain size then you start seeing Institutional money.

[Dave Rav]

I think a major component of influence here are the listing brokers.  No doubt, after the park owner meets with them, their opinion of value and asking price increases.  After all, it is in the broker's best interest for the price to go up isn't it?

And they often fail to give creedence to the #1 component and reason anyone wants to buy = profitability.  If we cant make money (for us, relatively early on please!), then we dont want what you're selling.  Period.

They always to mention the "upside" and "value-add" as well as under-market rents, etc.  These are all codewords for delayed cashflow, heightened management burden early-on, and potential significant repairs.  I like to says it's akin to asking the agent to 1) wait on their commission or 2) doing MORE work or being hassled for said commission.  How is it any different?