Hey Nate,
Since the property is not at a stable occupancy it really doesn’t make sense to use an income approach to value. At $200,000 for 24 pads you would be paying $8,333 per pad. This is cheap in any area of the country. Newer parks tend to sell for about $20,000-$25,000 per pad. It is all dependent on the condition, age, and density of the park. These are the biggest factors in determining the number of stars a park is rated at. 1-5 stars.
If you did want to use an income approach to value, it would only be speculation until it reached stable occupancy. Usually conventional lenders want to see mobile home parks at least 80% filled. So assuming an 80% occupancy, you could do the following…
Income
$120 * 22 pads = $2,640
$150 * 2 pads = $300
Total $2,940/mo * 12 = $35,280/yr
Expenses
Taxes - $2,050
Insurance - $500
Manager - $2,400
Utilities - $600
Misc - $1,000
Vacancy 20% - $7,056
Total $13,606/yr
Net Operating Income =$21,674
Income Value = $21,674/8% = $270,925
This assumes expenses at 38% of gross income, which is on the high side. So this number should be conservative. The thing to negotiate is a current price, as you would have to get into the park and fill it to reach a true value of $270,925. This amount will change with the cap rate. The cap rate will depend on the market area. Typically the more rural areas will go for higher caps of 9.0%+. A price of $200,000 sounds more than reasonable (assuming there is only one park owned mobile). Also, you mentioned only half of the units in regards to rents. I assumed $120 for the majority of pads. You would need to know what each pad rents for to get an even more accurate calculation.
I see that there is at least one mobile home being rented. This is referred to as a “park owned mobile,” in the finance world. Most conventional lenders will not allow more than 25% of the mobiles to be park owned. There are a few select lenders that will finance above 25% for a substantial increase in rate. There also tends to be steeper prepays.
The rents from mobiles will NEVER be used in determining real estate value, as mobiles in a park are a liability not an asset. Some alt lenders will allow the income from park owned mobiles to be considered in debt service, but never in collateral value. Mobiles in parks depreciate in value. This issue can sometimes leave a buyer with a gap to cover. Usually either the seller will carry the value of the mobiles in a seperate note, or some creative financing needs to be done.
I would be curious to know if the park is individually metered for utilities, and if that expense is passed on to the tenants. Usually utilities are one of the biggest expenses in a mobile park.
Financing…
$NOI / DSCR # (Varies with lender and program)
A typical DSCR requirement is 1.20
$21,674/1.20 = $18,061.67
$18,061.67/yr would be the max yearly loan payments this property could support. Local banks will often require 1.25 or higher, but we’ll continue this route…
$18,061.67 / 12 months = $1,505.14/mo (max mo. payment)
To see how much loan this supports you can check out some loan calculators I made. They may look somewhat crude, but they work. They are located at…
Loan Payment Calc - http://www.apartmentloanstore.com/payment_calculator.htm
Max Loan Calc - http://www.apartmentloanstore.com/max_loan_amount_calculator.htm
Hope this helps…
Thanks,
Colby