Fair Valuation of MHP

[Michael Willis]

I have come across a 60 spot MHP off market of interest to me.  I could use feedback on true value.  I have come across several ways to valuate and not sure where this lies or which way is best to valuate.  Of note is that this park is near a new town shopping center, in an area of 200k plus and near a new hospital too. Owner is holding firm at 2.6m. Thanks in advance!

The facts are:

* 60 pads total. 28 POHs. (Avg age of POHs is 20-25 years)

       54 occupied pads

         4 vacant pads 

         1 vacant POH.

Avg. lot rent: 450/mo

Avg. home rent: 850/mo

Total claimed income:  399k 

Total claimed expenses: 110k

Water treatment plant and well water

[Dmitri K.]

Total lot income: 54*450*12*0.5 (50% expense ratio as you have 2 private utilities) = $145,800

You also have 28 POH - say at $5000 each?  = $140,000

If you deduct POH price from asking price you are at 2.6mil - 140,000 = $2,460,000 asking price for lots only.

That gives you a cap rate of ~6%? 

Maybe more seasoned MHP investors can chime in but this looks expensive. Unless you are in California.

The rent is high, so there might be some reason to take that into account when evaluating this park, but i would still not cap the rent income and just pay a fair value on homes.

If they are good homes - maybe the $5k per home is low - but still, this is way high in my opinion.

Plus, he is running a park with so many rentals and 2 private utilities at a 25% expense ratio - also does not look right to me.