First Mobile Home Park

[Ray Rhoads]

I am talking to an owner that will owner finance 100% of a small 20 unit MHP, that also has 3 commercial buildings(one is leased).

Problems:

16 MH sites occupied and PARK-OWNED. From everything I’ve read it seems wise to see if I can get the tenants To own these homes through rent to to own or gifting.

The sellers business would then be way different than mine and therefore value the different differently right? This park has been on the market for over a year.

How would I go about valuing this property while also understand he is going to finance the whole thing for me.

Thanks for any help!

[Frank Rolfe]

We've owned many 20 space parks over the years, and the key items to consider are:

1) They can be hard to finance

2) They can be hard to sell due to scale

3) They can be hard to manage since you can't afford to hire very good talent

4) They are too small to weather any big hits in cap-x issues

So for this deal to work you'd want to have closer proximity to the park, city water and sewer, and no POHs. 

However, you do have 100% POHs so before you waste any more time on it, use this formula to test the value:

20 x [monthly lot rent] + current rent on 3 buildings x 12 x .5 (to be conservative) = NOI

Divide the NOI by the price he is asking.

If the number you end up with is less than 10 then it's probably not going to work. Even if the number is 10 or greater, it may still not work because of how much capital you have to potentially pour into the homes to sell them, as well as regular items that come up in due diligence, such as test ad demand.