How to value a fully parked-owned MHP (w/ new units)

[Jacob Hebert]

I'm working on a valuation for a small 16 unit MHP we will be listing.  The seller bought the park with a few existing units, made improvements to the park, filled the remaining lots with new homes over the last year and now has 100% occupancy.  There are now 16 lots, and around 6 of the units are less than a year old.  They sent over some very basic financials and they don't have the lot and unit rents separated out.  I know to get a decent idea of value we can cap lot rents for 16 lots at the area rate, and come up with a separate value for the unit inventory.  Or do you take the remaining rental income (minus lot rents) and calculate that additional value based higher cap rate, or a combination of both?  Any advice is greatly appreciated!

[Will Stewart]

I'd just build up from the bottom first. Find a market lot rent and take the lower end of it. Extract lot rent expenses (water/sewer/plow) that don't change regardless of POH or TOH. Build your "TOH NOI" and cap that. Figure out what the homes would sell for cash in your market and offer, say, 50-75% of that per home and tack that onto your capped NOI.

It all depends on your market, but I would buy it with the intent of selling off the homes for cash as they vacate (or to current tenants)