All Forum Posts by: Eliot M.

@Keith Hand great info! Thanks for replying and congrats on all the success! So you think a 50% expense ratio seems legit now that you’ve gone and done this and that is an average across all your parks?

I believe you said earlier in the post that you used both valuation methods - the cash flow valuation and the market value for the trailers. 

I would assume 50% ratio seems right because that’s what I’ve seen on my SFRs thus far. And I matter if you’re talking about mobile homes or houses, carpet is carpet, hvac is hvac, etc etc. 

@Bill F. very helpful thanks for the info. 

Hey @Keith Hand did you ever purchase?  How about an update?  Curious about your expense ratios on POH.

Hey @Bill F. I have a couple of houses for sale for ya... they operate at a 5% expense ratio, you can trust me, I promise!  lol.  I am just kidding with you.  I really do appreciate your and everyone's feedback.  I am of course starting at the seller's numbers but never really stay on those for too long... too much optimism baked in... but alas, such is the game we play.

For POH's, what sort of expense ratio should be a reasonable estimate for modeling out realistic assumptions?  Frank Rolfe's and Laura Cochran's rules of thumb above seem to totally discount any POH down to $0.  Is this a prudent way to look at things?  

Frank Rolfe says: MHP value = Lot rent per month x # of units x 60 or 70

Laura Cochran says:  MHP value = (Lot rent x 12 x # units)/19% or higher

Basic real estate common sense says: MHP value = NOI x market multiple (or divided by market Cap Rate... pick your fancy)

The problem with using the NOI is that you can never trust a seller's numbers. So, do you make your own expense numbers up in order to get to an NOI? Or do you just use the GRM formulas above?

So, how do you guys value mobile home parks?  

Also, what's the best way to check to see if lot rents are too low?  Just call the surrounding parks and ask?

Thanks everyone for the replies. 

Does anyone know of a lender in the Southeast who will loan against MHP's?  

Am I punishing this seller for running his business smoothly? I mean if he's truly running this thing efficiently I don't want to be discounting his NOI by more than necessary. AFter all, I would buy a MHP with intentions of improving efficiencies and then selling at a multiple on a higher NOI. I wouldn't want someone to come look at my park for sale and say, "you're running this park too efficiently. This is at an expense ratio of 20%. Well done. But I'm only paying on a 40% expense ratio assumption."

This truly is a different day and age than it was 3-4 years ago where you could find deals on the mls. It seems like most things are fully valued right now. 

Thanks @Samantha Magina for clarifying. 

@Kevin Manz and others: I had previously tried to just peruse a certain number of listings daily and reach out directly to the selling agent in order to schedule a viewing. To my disappointment this was unfruitful. I got a lot of weird responses like “let’s meet for coffee to get to know each other first” (talk about a huge waste of time... ma gosh..) the weirdest was when this listing agent wanted me to send over my drivers license first because of “safety reasons”. That was the last straw and that day I got in touch with a buyers agent that I know. 

That being said though, she is not the most motivated... and why should she be wasting time with me on cash deals at $100k when she can sell  nicer 300k homes 5 miles east or west?

I’m struggling with what to do here... honestly what is the best approach? Find a new buyers agent or go back to directly contacting listing agents?

Thanks guys for the replies. Good points on landscaping and liability. I was thinking about liability myself. 

I am intrigued by these types of value add deals but just keep hitting a wall on valuations. Sellers seem to want double what common sense dictates should be paid. I just made an offer yesterday on a much smaller park. I’m sure I will never hear from  the guy again because we were just so far off from each other...