Frank's number are based a certain set of standard to do a back of the napkin type calcualtion to see if your pruchase price is around the same as what the owners is stating how the property runs. If within 10-15% of the sellers price, then you may have a deal.
Cap rate is a good place to start, but based on sellers numbers, most people technically overpay for stuff just based on that. Opportunity is seen in the asset based on the operator/investor and how they would run it.
Alway's do your own pro forma, but I don't even don't that unless we have a deal under contract...that is when you starting doing you modeling and underwriting more extensively.
You can do it on the front end and see what the property runs like based on teh sellers numbers...but normally you are going to run it differently.
It also depends on the type of park you are buying and what that specific deal has going and not going for itself. Every deal is different.
Franks evaluation is basically industry standard and will get you to where you need to go when doing quick evaluations. I prefer to be a little more conservative when running that 60 or 70 number...and do more like 55 or 65 and sometime even 50 if it a small property.
This method holds true is most of the USA and most parks. Where it starts to not hold true is where lots rents are really high, and/or you have a smaller park or a lot of POH's in that park. Also it doesn't always hold true in really nice parks and/or California, florida, or east coast as those parks tend to trade at a higher price and lower cap rate per se. Also depends on the deferred maintenance and what type of Capex your going to do on that park.
