All Forum Posts by: Rohit Jindal

I need to put my deposit in escrow and I am running into closing companies that do commercial closings but do not deal with MHPs just because they have not done so before. I want to know if any can help me in understanding how is the closing of a MHP, with units a part of the deal, different from a traditional closing? Also does anyone know of any closing companies that deal with MHPs in Northern Virginia?

Thanks!

Ariel O. It is my first park but want to understand why not deal with Septic? I have heard public utilities is the best case scenario but not all parks will have that.

Thank you all. James, the park has public water and septic tank for sewer. The seller charges back the water to the tenants and charges a flat fee for sewer. Tim/George, I have valued the park by dividing its three streams of income. 1. Pad rent only for the whole park, at a 9-10% Cap Rate as the area I am look at on the East Coast has others that have sold for between 8.5-9% Cap. This takes into account a 45% expense ratio. 2. Valuing the POHs, based on their gross income, less pad rent income, and a 50% expense ratio. Having realized these homes are higher risk, and will require more maintenance. Then charging 10% Cap to them. I plan on valuing the homes correctly during the due diligence process to actually determine their value and then going back to the negotiation table with the seller. My current numbers show I am paying an average of $13,000 per home. 3. The Rent to Owns that the seller has, have been discounted back to their PV based on the streams of the future incomes they would generate. One of things I am thinking about doing post purchase is, starting to charge a maintenance fee of $50 per POH. This will allow me to have a separate budget to maintain the homes rather then relying on the tenants to inform me. The cash flows over the last 3 years show that 90 of tenants have been staying in the POH and have been paying on time. Has anyone had good experiences with POH on the east coast?

That does help James. Thanks. How do you find the park owned homes perform? Do they have a high expense ratio per your experience? I am marking them at 50% expense ratio and the pads at 40%. Does that sound about right?

Hi All. I am entering into a contract for a Mobile Home Park (MHP) soon. The seller and I have already agreed on a price and I have received the contract. Before I move to the next step I have been reading a book from owners of Mobile Home University that says they only value the income from the pads only in calculating the value of the park, and not the rent from the units the park owns on those land. The park I am looking has just about 100 lots and of which 40 lots have park owned homes. While I understand their concerns, I want to know if anyone else share their point of view. Does anyone have any experience with this type of a situation? Any guidance would be appreciated. RJ

Hi All: I just read all your comments and have a question around MHP expenses. I am running numbers on a MHP that rents all the pads out and the average operating expense ratio is between 45-55% over the last four years. Is that acceptable given everything is separately metered and renters pay for all utilities? What kind of expense ratio is acceptable for a MHP, on average? Any insight would be great! Thanks! Rohit

Hi All: I am looking at picking up a MHP in the near future. As I look at the numbers one the questions I have is around what goes into the revenue/sales/rent line in respect to calculating price based on the 2% or 50% rule. The seller I am looking to buy from has multiple line items aside from rent from MHs. He also has late fees, utilities, legal fees, application fees, and mail charges. While I agree with the planned income of rent, should I be including utilities income in there as it is truly being collected to be passed forward for expenses incurred on behalf of the renters? At least it doesn't make sense for the 2% rule if I am working backwards to calculate the price. Also do all the other windfall incomes of application fees, and others listed above make sense to part of the calculations? Any thoughts and advise would be appreciated! Rohit

Andrew Warner That was awesome information. I much appreciate it. As a follow up, do banks value the MHP the same way as MFRs? How is their appreciation measured? Is there a recommended way to price them? Thanks.

Andrew Warner That was awesome information. I much appreciate it. As a follow up, do banks value the MHP the same way as MFRs? Is there a recommended way to price them? Thanks.

Thank you both for the good feedback. Here are the numbers that I am seeing, feel free to tell me if it is a good investment or not. The asking price is $375,000. The site has 20 pads of which 18 are rented on a month to month basis. Opportunity to add two more homes. Homes are all owned by tenants. (Is month to month normal?) The asking price meets the 2% rule. The water, trash, and sewage is separate from the rent and is charged to the tenants as well, and contributes to the total revenue. Feel free to share your thoughts! Thanks once again.