Help with Mobile Home Park Analysis/Offer

[Robert Gillenwater]

We just made an offer on a 20 unit MHP. 100% occupied, 10 units are Park Owned. Broker said our offer didn’t have a shot with the owners and wouldn’t present it. We offered 440-460k plus market value of the park owned units. Here is how we based our offer: Average pad rent per month based on the 10 TOH’s - 350 350 x 20 = 7000 per month GOI 7000 x 12 = 84k annual GOI We averaged the expenses provided from 18,17,16 financials = 46k Average NOI = 38k Value based on approx 8.5% cap 450k Then we would add the market value for the Park Owned Homes to be determined during due diligence. Their asking price was 669,000. Am I missing something ie. Additional value for the POH’s income generation? Their 16 and 17 financial showed some high expenses for maintaining those homes. I didn’t feel it prudent to pay above market value for depreciating assets. I appreciate any insight anyone can provide. Robert

[Bill F.]

@Robert Gillenwater

your reasoning is sound and your method is one way to value parks with POHs. MHPs and POH rentals are two separate business and should be treated that way. 

Seems like the seller and broker don't know how to value MHPs and have unrealistic expectations or are trying to find an inexperienced buyer. 

The broker saying to your face they won't present the offer also seems odd. Why risk an ethics complaint when, if the seller said don't bring me any offers under $669k, they could just nod their head and wait a day after your submission to reject it?