Purchasing Mobile Home Parks

[Kim Knaust]

We are looking at purchasing a mobile home park, maybe 2 soon and am interested in hearing the best way you all that have purchased mobile home parks came up with the best value.

One park looks like a good opportunity won't give a sale price and just says "make an offer" we get calls all the time so you make the offer?!

Any input is appreciated!  Thanks.

[Ryan Groene]

If you talking directly with the seller, some points to bring up to them is that you are going to need more information about the park's operations in order to make an educated offer that the banks will be able to lend on that value.  so assuming you get the lot rent, number of occupied lots, and who pays water/sewer and what the utilities set up is...if its private or public water/sewer.  you can establish your formula and establish an estimated offer amount based on these items.  

formula is a follows....lot rent*number of occupied lots*12(annualize the amount)*.6 or .7(operating expense)=Net operating income

.6 if the park pays water/sewer and .7 if tenants pay water/sewer

once you establish your estimated NOI, you then apply a cap rate that you are willing to pay to it by dividing into that amount and you will get a base purchase price. All banks will look at the NOI and then underwrite the park as so.

so if you want to pay a 10 cap, you divide your NOI by .10 and you will establish your purchase price.

This is all a quick evaluation on what you should pay for the park to establish a price range. you then can add in some other income if the park generate is thru apartments, single family house, Park owned home inventory...and any other things that you would pay for to get the total purchase price.