30 year #'s seem way off... I've gone wrong somewhere

[Mark Harrington]

Hi everyone,

This newbie needs some guidance...  Have a mobile home park I'm trying to analyze.  There are 30 spaces and only 17 are currently rented at $165.00 a month.  I'm trying to use the calculator tool to project a possible scenario of all 30 spaces eventually rented at $250.00 a month.  This increase should be 5.858%.  However at year 30 on the projection it has the rents being well over $250.00 a month.  I can't see what I'm missing....  Appreciate y'alls help! View report

*This link comes directly from our calculators, based on information input by the member who posted.

[Bill F.]

@Mark Harrington

You have the annual income set to grow at 5.9% annually. In year 30 the calculator is assuming your lot rent is $921/month.

Free advice is worth what you pay for it, but the BP calculators, while a great tool for SRFs and small multis, are not designed to handle more complex situations, like a value add MHP with below market rent and infills.

[Mark Harrington]

Hi Bill, 

I guess the difficulty may be in the calculator is not considering the "infills"...  is there some other way to project this out... a more sophisticated calculator?

[Joe Villeneuve]

Originally posted by @Mark Harrington:

Hi Bill, 

I guess the difficulty may be in the calculator is not considering the "infills"...  is there some other way to project this out... a more sophisticated calculator?

 Yes.  A pencil, a piece of paper, and a calculator.  You probably would already have your answer by now...5 times over.

[Bill F.]

@Mark Harrington 

Continuing in the vein of @Joe Villeneuve's brutal honesty, if you have to ask... 

To answer your question, there are a bunch of ways, 

pen, paper, and financial calculator is one, albeit slow. 

I use excel and have developed my own spreadsheets that are MHP specific and can handle the unique situations of the space. You can use any standard IRR template as a basis and modify as needed.

There are software systems out there, like Argus, which can handle a lot of this, but I have a feeling you don't want to pay for this capability. 

[Omar Khan]

@Mark Harrington Great advice on offer by @Bill F. and @Joe Villeneuve but honestly, 30-year analysis is overkill. If you're not making money in the first decade, this might be the best and highest use of your capital. 

Also, pen and paper (or Excel) beats most online calculators. You have to realize most online calculators are not made by operators but by marketing folks trying to sell you a product. 

I love marketing and have a partner for it. He doesn't do operations for a reason.

[Joe Villeneuve]

Just to add here, I too designed my own Excel Spreadsheet to do this.  I use Excel a lot.  I have custom designed many analysis tools for all of my strategies...which have somehow exploded into full software programs.  I told my wife, "If we weren't already married, I'd marry Excel".

[Bill F.]

and @Omar Khan comes in and address the real issue the rest of us missed. 

Agree 100%. Projecting 30 years out is a waste of time. 

30 years ago Jack Welch was CEO of GE and people couldn't stop raving about him and the company. Look at them now... (Not that I'm entirely negative on GE, but that's besides the point)

[Mark Harrington]

Anyone care to share their spreadsheets...  I'd also be willing to pay y'all for one.  Appreciate the input and help.  Don't mind brutal honesty as well...

[Bill F.]

@Mark Harrington Being honest again, you'll have similar problems using people's spreadsheets as you did with the financial calculators, mainly you don't understand how they are constructed and their embedded functions limitations.  Its just another big black box which you plug numbers in and 'answers' comes out via some magic. I put answers in quotes, because they aren't answers at all, but just numbers that more likely than not have little connection to reality. 

My advice. 

1. Look in the FilePlace. You can look a lots of people's templates and see which ones you like while getting a feel for what makes a spreadsheet work for you. 

2. Instead of paying for someone spreadsheet, take an excel course. I'm convinced if someone mastered all that excel can do, we'd figure out it could cure cancer. I started with this one from Wall Street Prep, but there are others out there too. 

[Alex Bekeza]

@Mark Harrington To add a little more complexity to your scenario.... You need to account for the fact that no bank will offer you 25 year am and below 5% interest on a MHP with this low of occupancy.  Those are pretty dreamy numbers even if the park was firing on all cylinders.  

Only way to acquire a park with occupancy like that is going to be all cash or seller financing.  I'm not aware of any HMLs who are doing MHPs but if anyone else is please do send me that info!