How does financing impact your calculations for MHP pricing?

[Yvonne H.]

Hi everyone. I am interested in a trailer park but would need financing for it. I have see on here the basic formula for attaining the value/cap rate for a mobile home park. What I am specifically interested in is how you would factor in the financing risk.

To get more into detail:

I am looking at purchasing a MHP. I understand the value is income-approach. But long-term, how do you factor in the financing risk on a depreciating asset. So, let's say I buy a MHP for $1MM. I finance 800K, 200K down payment. All POH, no TOH. My worries are in the loss of the MH, or the MH just getting so old it's unrentable without major investment. 

Also, the MHP in question is located in an area where new pads cannot be added. If a MH is lost to fire or whatever, it has to be replaced with like-kind or better within 30 days or it can't be replaced at all. 

I would still have a mortgage to pay, no matter what, but might be looking at MAJOR expense (building or buying new MH) to replace any that are lost, thus reducing income and the margin between income and PITI.

The land is not worth what the income is worth. So I would be upside down on the mortgage if I were to lose X amount of income.
I would not want to lose my investment in the land. So how do I take into consideration that risk?

Any experience, advice, and war stories are welcome :) 

Thanks