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Updated over 9 years ago on . Most recent reply

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Mark Brown
  • Investor
  • Birmingham, AL
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Deal or no deal

Mark Brown
  • Investor
  • Birmingham, AL
Posted

OK - need the forum's advice on evaluating this current deal.  38 total pads, 31 of which are rented, 17 of which are park owned homes (so the mix is 14 pad only rentals and 17 park owned homes).  The location is really good (within 10 miles of a city of 200k) and there are not other low income housing units within a 20 mile radius.  The asking price is $500K, which seems high to me, but based on that price, I'm coming up with about a 13% cap rate.  Lot rents are currently $135/month (which is way below market, market is around $200).  POH rent for about $200/month.  The POHs are older (about half are 15 years old and the other half are 20 years old).  Park is on septic, and does not have water or any other utilities submetered.  If I do my calc and take 31 pads @$135 and use a 60 multiplier, I get $251K value.  Assuming this, that would mean that the POHs are going for about $14K each... Initially, I thought this price was way too high, but the market data is great, and if I could get rents to $200/month, it seems there is much upside.  Can you guys help me with assigning the value to the park owned homes?

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Curt Smith
#4 Innovative Strategies Contributor
  • Rental Property Investor
  • Clarkston, GA
1,918
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Curt Smith
#4 Innovative Strategies Contributor
  • Rental Property Investor
  • Clarkston, GA
Replied

Watson, that's correct, and also you don't cap rate the home rent. Strip the cash flow to all lot rent. IE all 31 pads are paying lot rent. Then add in nominal price for the POHs say $3k each. Subtract off expenses to arrive at NOI. A cookie cutter formula is 30% expenses for an all lot rent park.

(#pads) x 12 x ($lot rent) x 0.7 = NOI / 0.1 (10 cap) = max offer price. You might offer at 11 cap or better.

  • Curt Smith
  • [email protected]
  • 678-948-7151
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