Need Help Evaluating AZ MH Park with some RV Lots

[William Thorn]

I have an off market deal in AZ that I would like some more input on evaluating. The owner has terrible records and even if he did they wouldn’t be very helpful since he bought the park with only 4 mobile homes on it a few years ago so financials would obviously be of no use because he has brought in a bunch of homes.

-40 MH lots
-8 RV lots
-city water/sewer billed back to tenants
-individual gas/electric meters direct billed to tenant
-30 occupied MH’s with 22 of the homes with notes, lot rent $395
-3 RV’s on MH lots at $300, tenants pay all utilities
-8 RV’s with lot rent of $300, long term and tenants pay utilities
-7 vacant MH pads

Again, the seller has basically no financials. He is offering seller financing with $500,000 down and 4.5% interest rate and wants $1,900,000.

MH value= $395x30x12x.7= $99,540 NOI@ 7.5 cap is $1,327,000
RV value= $300x11x12x.5= $19,800 NOI @9.5 cap is $208,421
The homes according to him are valued at $10,000 each= $220,000

Questions:

1. 1.Would you use a higher expense ratio for the MH’s because its a smaller park?
2. 2.Being mostly homes with notes, how does that effect value?
3. 3.He said the notes are in compliance but I thought with the Dodd Frank and Safe act it wasn’t legal?
4. 4.Should I give him 75% of home value?
5. 5.How do I factor in the note income in my underwriting or just leave it out?
6. 6.Any other significant items to look at with this info?

Thank you