Mobile Home Park Valuation

[Ryan Pettit]

Looking for help in determining the value of a MHP I’m looking at in Texas.

21 lots - 13 are rented @ $330/month

6 park owned homes - 2 are currently rented for $500/mo

Park has a lot of upside potential and is on city water and sewer. Tenants pay their own electric. Landlord responsible for water bill. 

I know there are a variety of ways to value this property given its current rent roll and possibility of filling the park and making much more money. 

Can someone point me in the right right direction on valuation? Ive seen lots rented x monthly rent x 70 and also a cap rate valuation using NOI.

Thanks!

[Jack Martin]

@Ryan Pettit if I interpret what you have shared correctly, there is only one vacant space?  13 pads are collecting $330 per month, plus 6 POHs collecting $500 per month?  If that is the case and your goal is to sell the POHs to existing or future residents, then the quick back of the napkin valuation would look like this:

20 x $330 x12 = $79,200 (that is your gross pad rent for a year) minus 45% for expenses (you might be able to run it for less, but for the sake of quick valuation) would give you NOI of $43,560. Divide that by the market cap rate and there's your rough estimation of value.

The upside is in running the park expenses better than 45%, sub-metering the water so you can pass on those expenses, and filling the vacant space.  Not a lot of upside on a deal like this one, so you'll want to be happy with the price going in.  

Initially, you can run the park as it is and as the POHs become vacant, you can do whatever renovations necessary and sell the homes.  Alternatively, if the existing tenants qualify you can sell the homes to them.  You'll likely end up with a blend of each.